Tesco loan

marky.fitz

Hi all
Im considering taking out a Tesco loan for £20k for new car purchase @ 6.1% and am just looking at 5 or 10 year options.
I am going to be paying off the loan within 6 months as just awaiting probate going through.
My question is I’ve never taking out a loan before but would I be better off taking 10 year option with lower monthly payments or 5 year option or over this short period would it not make too much of a difference in terms of final repayment?
TIA of any advice.
Mark

CliveOfIndia

The biggest factor will be the interest rate - likely to be different for the 5 year option versus the 10 year option.  When you come to settle the loan, they are allowed to charge an early settlement fee of up to 2 months-worth of interest.

Having said that, you might struggle to get a 10-year loan for a car anyway - that's an awful long time to be paying off a car (they don't know that you're planning on settling it early).

But all that aside, it would be far more prudent to just wait for 6 months then buy the car for cash.

DrEskimo

As above, what's the rush?

If there is, then go for as short of a term as possible. 2-yrs would be better so that you pay more of the loan down over the 6-months and reduce the interest charges as much as possible.

MEM62

marky.fitz said:

I am going to be paying off the loan within 6 months as just awaiting probate going through.

Why not wait for probate to complete?  Borrowing money on the expectation of money coming your way is not usually wise.  

pinky_

marky.fitz said:

Hi all
Im considering taking out a Tesco loan for £20k for new car purchase @ 6.1% and am just looking at 5 or 10 year options.
I am going to be paying off the loan within 6 months as just awaiting probate going through.
My question is I’ve never taking out a loan before but would I be better off taking 10 year option with lower monthly payments or 5 year option or over this short period would it not make too much of a difference in terms of final repayment?
TIA of any advice.
Mark

I'm also going through Tesco loan process at the moment, maybe I can help you decide. 10 years the interest will be 7.8% , I personally don't think it's worth going for 10 years as it's not necessary to have a loan for so long and the extra interest is quite heavy. I would look at 5 years and 7 years especially doesn't seem bad as interest only goes up to 6.4% . Anything over 7 years then the interest is 7.8% , if you're gonna pay it off within 6 months as you say then you could possibly go for the 10 years, as overall the interest differences in only 6 months won't be that much , however I would go for 7 years incase something comes up and you need the probate money for something else. Also don't forget about payment holiday at start of loan too for 2 months, you can have that if you want for not much more.

I took out Tesco loan recently myself as I bought a taxi on finance recently (I'm a black cab driver in London) this loan is way cheaper than the finance , so I'm going to pay finance off with the loan. The maximum loan I'm allowed is short of the finance I owe but I'm going to have to make up the difference cash, but my monthly payments will now be halved with this loan.

pinky_

MEM62 said:

marky.fitz said:

I am going to be paying off the loan within 6 months as just awaiting probate going through.

Why not wait for probate to complete?  Borrowing money on the expectation of money coming your way is not usually wise.  

I agree , likely something will come up in that time and the probate money having to go elsewhere and then op is stuck with the loan.

MEM62

pinky_ said:

MEM62 said:

marky.fitz said:

I am going to be paying off the loan within 6 months as just awaiting probate going through.

Why not wait for probate to complete?  Borrowing money on the expectation of money coming your way is not usually wise.  

I agree , likely something will come up in that time and the probate money having to go elsewhere and then op is stuck with the loan.

Absolutely, chickens and counting  :-)