Looking for £10k car loan, but paying back early.

MunkyHeed

Hi all.
Car is on its last legs. I'm looking to get a £10k loan to help cover the replacement, however I'm due to get around £8k this time next year via a ShareSave plan at work.
Am wondering if there's a better way to go about this than just getting the best £10k loan I can find whilst paying off the standard monthly payments this year until I can pay it all off when the ShareSave plan matures next year?
Is it likely that the loans with the cheapest APR is likely to have the highest 'early repayment' charges?
Thanks. 

CliveOfIndia

MunkyHeed said:

Is it likely that the loans with the cheapest APR is likely to have the highest 'early repayment' charges?

Early repayment charges are legally regulated - the most a lender is allowed to charge is up to 2 months of interest (1 month if there's less than a year left on the loan).  So 2 month's worth of interest will be more for a higher APR loan, less if the APR is lower.  But a lender can't impose, say, 4 months worth of interest just because the APR is lower.

One option may be a Money-Transfer credit card.  This is where the card company deposits money into your current account and you pay the corresponding amount off the credit card.  A few things to think about for this option:

1) It depends on you being accepted and given a high enough credit limit

2) There's almost always a fee to pay (expressed as a percentage of the amount transferred)

3) You must make at least the minimum payment every month

4) You must make sure you can repay the outstanding balance when the promotional rate expires - otherwise any remaining balance will attract interest at the card's standard APR, which is likely to be far higher than any loan you'd get.

So there's a few caveats, but it's something you may want to investigate.  You're highly unlikely to be able to use a 0% purchase credit card - most car dealers won't accept a credit card for anything other than a small deposit, due to the fees they get charged by the credit card company.

(You may want to put a small deposit on an ordinary credit card and fund the balance by whatever alternative means are available to you, whether that's a loan, MT card or whatever, to benefit from S75 protection.  S75 is not a magic panacea that will cover every eventuality, but it can be a useful added benefit for certain circumstances).

MunkyHeed

Really useful. Thank you. I didn't realise early repayment charges are legally regulated. I'll investigate MT cards too.

Thanks again. 

DrEskimo

Is the car really not able to last until the ShareSave plan matures?

I would look to start saving the monthly theoretical loan repayments now into a high interest savings account and then when the £8k is matured, add that to your savings and replace then.

If you can, would be good to benefit from the interest, rather than pay it to a bank.