car finance question

Kenai · 1 Jan 2016 at 11:28

DooMeR said:
he plans to have the car mostly paid off by the summer. He is a farm worker and earns decent money in the summer.

Will there not be early repayment fees in that case?

rodenal · 1 Jan 2016 at 11:31

No not anymore, they must deduct the relevant interest no longer accrued when overpaying now. You may get a choice of reducing term or monthly payment but other than that you can't be penalised as such

craig_t · 1 Jan 2016 at 11:38

As he only earns decent income during summer, is he getting a lot less in winter? They'll use that against his ability to pay back if he gets too little?

iaind · 1 Jan 2016 at 12:21

Mortgage won't count against him - quite the opposite provided he's always made the repayments on time. You build a good credit file by borrowing and paying back. You reduce your credit score by not paying stuff back in time.

DooMeR · 1 Jan 2016 at 22:35

We talked it out and he seems happy now

He only earns good money 3 months out of the year and if for whatever reason they have a bad harvest due to bad weather or whatever then his annual income would be pretty poor so that what we thinking is holding him back.

I worked it out that hes only paying around 30 pound a week which is nothing really in the big picture and hes saving money on road tax fuel and so on.

Thanks for the feedback every one

DR_Pingu · 2 Jan 2016 at 01:05

Anything up to ~18%APR is ok IMO as far as I'm aware with what dealers 'use'. Unless your dad has a really terrible credit score/level in which case his APR will be dire (my friend is a dealer, some of what people have to pay if their credit score is bad mesmerises me

)

weringo · 2 Jan 2016 at 01:15

Check for early repayment penalties and if none/they're not significant apply for a money transfer credit card and use it to pay off the loan early.

You can get 0% for 3 years and 2.39% fee at the moment with Virgin.

http://www.moneysupermarket.com/credit-cards/money-transfer/

cadmunkey · 2 Jan 2016 at 01:21

weringo said:
Check for early repayment penalties and if none/they're not significant apply for a money transfer credit card and use it to pay off the loan early.

You can get 0% for 3 years and 2.39% fee at the moment with Virgin.

http://www.moneysupermarket.com/credit-cards/money-transfer/

Also clysdale bank and the post office are both doing 23 months at 0%.

rodenal · 2 Jan 2016 at 08:33

DR_Pingu said:
Anything up to ~18%APR is ok IMO as far as I'm aware with what dealers 'use'. Unless your dad has a really terrible credit score/level in which case his APR will be dire (my friend is a dealer, some of what people have to pay if their credit score is bad mesmerises me )

18% is horrendous!

[TW]Fox · 2 Jan 2016 at 09:20

Kenai said:
Will there not be early repayment fees in that case?

No, early repayment fees are capped at a trivial amount by law.

The_Abyss · 2 Jan 2016 at 10:02

DooMeR said:
I am not a maths whiz but i got hold of the paper work and i worked it out hes around paying 10% per year on the amount borrowed and cause he borrowed it over 5 years its worked out at fair bit of interest over the 5 years. It works out to 33% overall.

Still seems a little high to me but his monthly repayments are quite low so overall i think hes happy with the deal he got.

It just can be quite confusing all jargon you get fed and they don't really make it simple for people to understand at times.

I just still get the feeling 33% overall interest is high i don't think is credit rating is that bad for it to warrant it being that high.

Why the need for all the calculation? The APR should be clearly disclosed on the paperwork.

Aeleys · 2 Jan 2016 at 10:49

I found it a lot cheaper to just take out a loan via bank and pay in full then pay back the loan with a lot less interest and overall cheaper.

Richie · 2 Jan 2016 at 11:26

craig_t said:
I never understand why people go for Finance over bank loan? The interest rates are significantly better and you don't have these issues of being ripped off! Plus, at a lower rate he could get a lower term, which means higher monthly payments for the loan equivalent to what he is able to afford on Finance, but the time to pay it off is less and also means interest is less.

There are benefits to HP over Personal Loan which can appeal to some people e.g. Voluntary termination, ability make overpayments etc which you dont get with a personal loan.

Also - because HP is secured against a tangible asset (car), it can sometimes mean a person can get the loan where a bank refuses because the bank loan is unsecured. HP companies can repossess the asset to sell on and reduce any losses

Kenai said:
Will there not be early repayment fees in that case?

[TW]Fox;29004621 said:
No, early repayment fees are capped at a trivial amount by law.

HP companies don't charge for early settlement. They actually give a rebate of any interest outstanding off the final settlement figure. An HP agreement is structured as follows:

A = Capital (amount actually borrowed)
B = Interest portion
C = Monthly payment

The finance company then add A and B then split that figure equally along the term e.g. 48 months and you end up with 48 x C. If you settle at month 36 (for example), the finance company will take all the remaining "B" amounts (12 x B) off the final settlement and you have your figure to pay off.

The only additional payments to make is a "documentation fee" (payable with the first payment) and an "Option to Purchase Fee" (payable with the last payment). Both are dependant on the finance company but are typically £150 each and are payable regardless if you settle early or not.