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The more I borrow the better???

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  • 24-02-2011 10:59pm
    #1
    ForestFire
    Registered Users Posts: 2,368 ✭✭✭


    Hi All,

    I am buying a new car and I will be financing it by trading in old car, savings (10K), loan and selling current car.

    I want to take out a personnel variable loan as I can pay it off quicker once I sell my car. I need to borrow about 7000.

    But while looking at the repayments and changing the term etc, I noticed the following.

    Loan
    term
    APR/AER
    Montly
    7000
    4
    12.109%:mad:
    187
    7000
    5
    12.109%:mad:
    157

    10000
    4
    11.395%:o
    264
    10000
    5
    11.395%:o
    220

    15000
    4
    10.559%:eek:
    390
    15000
    5
    10.559%:eek:
    325:D


    As the interest rate gets better the more you borrow, and I can pay off as much as I want without penalty.

    Am I better off borrowing more for the car, not using my 10k savings
    Then pay savings off the loan the next day (10K), following by another lump sum when I sell my car??

    All this assumes I can afford the 325 a month as this will not change, only the term will shorten?

    Thanks for your feedback


Comments

  • Options
    #2
    Ste.phen
    Registered Users Posts: 2,808 ✭✭✭Ste.phen


    There might be penalties for early repayment, no?


  • Options
    #3
    ForestFire
    Registered Users Posts: 2,368 ✭✭✭ForestFire


    Website states

    Unscheduled repayments
    Repay your Personal Loan early if your circumstances change or make additional lump sum repayments at any time with no penalty.

    And

    No set up charges or fees for early repayment of your loan.

    So this sould clearly mean I can pay as much as I want to reduce interest.


  • Options
    #4
    chris85
    Registered Users Posts: 4,502 ✭✭✭chris85


    sounds like a plan. its variable rate so no penalties for early payment


  • Options
    #5
    unclebill98
    Registered Users Posts: 3,816 ✭✭✭unclebill98


    If its UB then if the lump sum payment is over 10k you'll suffer a penalty. They may reduce the payments to keep the term the same also. so make sure its what suits you.

    This rule applies to fixed rate loans too.


  • Options
    #6
    ForestFire
    Registered Users Posts: 2,368 ✭✭✭ForestFire


    just think about this more simply and assuming I have no savings...

    If you want to borrow 5000...

    Borrow 15000 and pay 10K the next dat to get a better rate and still end up with 5000???

    Can this be really right?
    The only draw back I see is ending up with bigger monthy repayments as they state this will not change but the term will.


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