Getting a loan for...

Arsonist

Arsonist

Arsonist

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So I need a new car and have decided to take out a small loan to cover the cost plus insurance etc.

I only really need 2-3k for the car I want, which I can pay back within 2 years with no issue, but I'm also wanting to start a Help To Buy ISA to get a mortgage together.

How 'legal' is it to take out a loan of say 4k and immediately dump £1200 (maximum amount you can put in a HTB ISA for the first month) into an ISA?

I can borrow 5k for £5200 over 2 years, so essentially costing me £200 over 2 years, but the 'government' top-up of 25% (when finally cashing in on a deposit) would already be £300 - so in a way, actually being given £100 to borrow 5k...

Does anybody know how legal this is to do?

Ta
 
If its a personal loan, you can do whatever you want with it but, to be effective, the savings interest rate needs to be higher than the loan rate
 
Richie said:
If its a personal loan, you can do whatever you want with it but, to be effective, the savings interest rate needs to be higher than the loan rate
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I'm looking at loan rates of about 4% and ISA rates of about 2.5% - however the £300 government money gained immediately on the £1200 add up to, in theory, 27.5%. So as long as I'm not going to get chased by HMRC etc then this looks like a winner!
 
The loan doesn't come from the government so I don't see why it would be an issue but then the old IANAL does apply.
 
You only get the bonus after you have applied to buy your first house and you have to get your solicitor to apply for it so its not automatic. Also, you are saying you can get loans at 4% well that's over £5400 you would pay back over the 2 years. Since 4% of £5000 is £200 (actually slightly more but just generalizing) and its over 2 years. Also, don't forget the quoted rates of interest on loans don't apply to everyone and the rates will be affected by your circumstance and credit rating. If it all works out its not a bad idea if you are thinking of buying a house in a few years time and can save to £12,00 and get the £3000 bonus. I also believe you can go in with a partner and have one each so you can double the bonus. Its free money if you are planning on buying a house!.
 
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Do whatever you like with the cash, OP. It's an unsecured loan - they have no control over it beyond chasing the debt.

Slade2 said:
Also, you are saying you can get loans at 4% well that's over £5400 you would pay back over the 2 years. Since 4% of £5000 is £200 (actually slightly more but just generalizing) and its over 2 years.
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it's about £200 interest (since the average balance during the loan period is half of the advance - so £2500 x 4% x 2yrs)
 
cheesyboy said:
Do whatever you like with the cash, OP. It's an unsecured loan - they have no control over it beyond chasing the debt.



it's about £200 interest (since the average balance during the loan period is half of the advance - so £2500 x 4% x 2yrs)
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That is not what the OP was saying though, he wanted to borrow £4000 which is £1500 more than £2500 so it will be closer to the £400 in interest but yes you are correct is some respect but do remember that some interest rates are better the more you borrow and so the OP might pay more interest to borrow less.
 
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Scam said:
Why not borrow money on an interest free credit card instead of paying interest on a loan. You'd easily get one with over £2-3k limit.

It's called stoozing, by the way. MSE has a guide on it and everything: http://www.moneysavingexpert.com/credit-cards/stooze-cash-credit-cards
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Good in theory but in practice no car dealer is going to let you pay by credit card without passing the fee on to you. So that's 2-3% on top.

Any that offers to waive it is simply using margin you could have haggled off anyway.
 
Arsonist said:
I'm looking at loan rates of about 4% and ISA rates of about 2.5% - however the £300 government money gained immediately on the £1200 add up to, in theory, 27.5%. So as long as I'm not going to get chased by HMRC etc then this looks like a winner!
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Just rember you can only buy s house worth 250k or less with that isa.
 
I think you have to save for 3 months, i.e £1200 + £200 + £200 to get the minimum bonus and it only applies when you buy your first house.

Otherwise you get 4% APR with Halifax, which is nothing.
 
It's only 3 calendar month boundaries so you could e.g. put £1200 in on 31st January, £200 on 1st February, £200 on 1st March and be eligible for the Brucey Bonus in around 30 days. However the conditions are quite restrictive (FTB/£250k) so I'd be a bit wary of taking out a loan to fund it rather than just having a smaller loan and funding it from income.
 
[TW]Fox;29656893 said:
Good in theory but in practice no car dealer is going to let you pay by credit card without passing the fee on to you. So that's 2-3% on top.
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Never bought a car so I didn't know that. It's so cheeky adding a credit card fee to purchases, I tend to avoid any shop/agent that does that.

Surely if it's 2-3% that's fairly similar to the interest on his loan though?
 
I agree, the house market is out of control and the whole brexit issue could normalise things.

It's still a no brainer as a first time buyer to take these ISA's out though.
 
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