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      12-14-2014, 07:24 PM   #1
JJ0063
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Last edited by JJ0063; 12-15-2014 at 12:14 PM.
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      12-14-2014, 08:14 PM   #2
cupraraj
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the way i see it. the only interest on the 2k extra you will be paying is 60 quid over the 5 years

i hope ive calculated it right.
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      12-14-2014, 08:41 PM   #3
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If I were you I'd scrap the finance entirely and take out a personal loan. I was looking at about 15/16% APR on finance for my 335d, I took out a personal loan for the 11k and I'm paying 6% with tesco bank and I'm only 20 with a questionable credit history.
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      12-14-2014, 08:50 PM   #4
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Quote:
Originally Posted by JJ0063 View Post
I took out a personal loan to buy my e90 through my bank.
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Originally Posted by Svothe View Post
If I were you I'd scrap the finance entirely and take out a personal loan.
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      12-15-2014, 03:09 AM   #5
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I see in the other thread you predict you'll be doing upto 30,000 miles a year.

To be considering buying a cheaper, older 335D with the plan of financing it for 5 years is a bit much for me. The kind of mileage and age of the car will almost defiantly see you strike a few big issues that will cost potentially more than your finance payments for a long time.

Buying an older car which will have already covered a fair few miles with the potential on another 150,000 miles, on top of the upto 150,000 miles on the clock you said you would consider, could likely see the car in the scrap yard long before you've paid the loan.



If you're needing to keep payments around about 200 per month, your fuel bill alone will be double the monthly repayment and about 40-45% more than the 320d.

Not to sound like a right pessimist, but I wouldn't be trying to run an old 335d on a tight budget.

Last edited by Kerr; 12-15-2014 at 03:18 AM.
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      12-15-2014, 03:34 AM   #6
JJ0063
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Quote:
Originally Posted by Kerr View Post
I see in the other thread you predict you'll be doing upto 30,000 miles a year.

To be considering buying a cheaper, older 335D with the plan of financing it for 5 years is a bit much for me. The kind of mileage and age of the car will almost defiantly see you strike a few big issues that will cost potentially more than your finance payments for a long time.

Buying an older car which will have already covered a fair few miles with the potential on another 150,000 miles, on top of the upto 150,000 miles on the clock you said you would consider, could likely see the car in the scrap yard long before you've paid the loan.



If you're needing to keep payments around about 200 per month, your fuel bill alone will be double the monthly repayment and about 40-45% more than the 320d.

Not to sound like a right pessimist, but I wouldn't be trying to run an old 335d on a tight budget.
Thanks for that Kerr. I am weighing up the options and may well just go for an e91 320d with more toys maybe.

Anyone else able to confirm the loan thoughts? I can't work out if I'm massively missing something or not!

Thanks
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      12-15-2014, 06:18 AM   #7
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Assuming the two loans were taken out from day zero. The total you'd roughly repay would be

12,250 for 8740 over 60 months
13,350 for 10740 over 60 months

So yes, you get an extra 2000 for 1100, and when you take into account you should be paying interest on that 2000 too, the deal works out even better.

Compounding interest hurts. 13% is a really high rate to borrow imo.
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      12-15-2014, 06:21 AM   #8
JJ0063
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Originally Posted by djgandy View Post
Assuming the two loans were taken out from day zero. The total you'd roughly repay would be

12,250 for 8740 over 60 months
13,350 for 10740 over 60 months

So yes, you get an extra 2000 for 1100, and when you take into account you should be paying interest on that 2000 too, the deal works out even better.

Compounding interest hurts. 13% is a really high rate to borrow imo.
Thanks for that.

So, in theory, even if I were to keep the car.. I would still be better off taking the extra 2000 and having it sit in the bank/savings account? I see it that I pay less interest on borrowing more?

I may be getting this completely wrong.

Thanks
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      12-15-2014, 06:50 AM   #9
JJ0063
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Quote:
Originally Posted by djgandy View Post
Assuming the two loans were taken out from day zero. The total you'd roughly repay would be

12,250 for 8740 over 60 months
13,350 for 10740 over 60 months

So yes, you get an extra 2000 for 1100, and when you take into account you should be paying interest on that 2000 too, the deal works out even better.

Compounding interest hurts. 13% is a really high rate to borrow imo.
The only thing I'm thinking is that as I've already paid 5 months off my current loan, thats 990 already paid, so I am in theory getting 1010 - if you catch my drift.

My brain is fried, but I still can't see a way that I'm worse off.

Thanks
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      12-15-2014, 06:59 AM   #10
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Yeah you are better taking the extra money from day zero. Not sure how it works out now without all the numbers but with lower interest and such a long borrowing period it makes more sense to go with a lower interest loan.

The easiest way to look at it is the cost of the loan.
The first loan costs 3510
The second costs 2610

So as long as you can meet repayments it makes no sense to get the smaller loan as you are paying more interest.
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      12-15-2014, 07:06 AM   #11
JJ0063
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The monthly payments aren't an issue as its what, 16 difference. In theory the 2000 extra can cover the 960 over 5 years that the 16 difference makes.

I still feel like I am missing something here, lol.
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      12-15-2014, 07:34 AM   #12
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You're not missing anything. The loan you currently have is 5% more interest. Here's an example of how quickly compounding interest gets out of control.

You have 10,000 borrowed at a rate of 8.9%. You never make the payments each month so you never pay off anything. After 5 years you would owe 15,315.79 a total increase of 5,315.

Now if the initial rate was 13.8% you would owe 19,085.84 a total increase of 9,085 and 3,770 more interest than the lower rate

If the initial rate was 4% then you would only owe 12,166.53.

Loans over 10% are bad news for the borrower and you should always try and pay such loan off early if possible.
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      12-15-2014, 07:37 AM   #13
JJ0063
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That makes a lot of sense.

So, in theory I ought to take the 2000, put it in a high interest account for a year/ X amount of time, then make an early repayment of 2000.

That way I pay less interest overall.
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      12-15-2014, 08:11 AM   #14
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Perhaps, but by the time your 2000 has earned "high interest" your loan is almost all repaid and most of your repayments are capital rather than interest.

Your early payments are where the largest proportion of interest is paid because the capital is higher. By the time you are down to 2000 left your interest is fairly puny.

You are better off paying that 2000 extra immediately to reduce the size of the loan. You can probably do that you know, the penalty is usually smaller than the interest cost.

I know banks often have crazy interest rate brackets like the following

2500-4999 = 17%
5000-7499 = 13%
7500-15000 = 7%

So given the above, if you only wanted 6000, you'd probably be better off borrowing 7500 and immediately repaying 1500 of the loan with the left over money, effectively giving you a 6000 loan @ 7%. You might get a penalty of 50 though, but that is nothing compared to the cost of the interest on the 13% loan. Sometimes this doesn't work though as banks are sneaky and front load all the interest into a repayable sum and they won't recalculate interest unless the loan is cleared entirely.

So it all depends on your circumstances, but if it is beneficial, it always makes sense to clear as much debt as soon as possible because interest generally accrues on a daily basis.
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      12-15-2014, 08:12 AM   #15
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If you're able to make an early repayment (and as long as you get the benefit of this via reduced interest payments), take the larger loan and pay the 2k straight back.
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      12-15-2014, 08:14 AM   #16
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Thanks guys.

I've applied for it, I think i'll do what is suggested & pay the 2000 back and be left with a lower interest rate.. and reduced monthly payments.
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      12-15-2014, 09:13 AM   #17
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I can't see that working. The lender will probably not allow you to pay a lump sum that early having given you the reduced rate for borrowing more but obviously that is down to each individual lender and what they will/won't allow. It's also assuming you'll be given the loan in the first place having only just taken one out.
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      12-15-2014, 09:20 AM   #18
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I can't see that working. The lender will probably not allow you to pay a lump sum that early having given you the reduced rate for borrowing more but obviously that is down to each individual lender and what they will/won't allow. It's also assuming you'll be given the loan in the first place having only just taken one out.
There's nothing on the agreement that states a time frame for early repayments, so we'll see - at the end of the day it's a lower interest rate so will be cheaper all round in the long run.

In terms of acceptance it was approved in principal & my current loan has disappeared from my online banking now so I can only assume it's gone through OK. Its with a bank i've been with for 15 years so hopefully i'll be OK!
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      12-15-2014, 10:06 AM   #19
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Legally they are only allowed to charge early payment penalty of 2 months if you try to clear the whole amount, not sure how it works in your case.

But your numbers are right, because your taking a larger loan, the interest rate drops, so you at getting £2k extra of loan for no extra interest.....But don't think of it as 'free' money.

You are still paying £3000 of interest in total for a £10,000 loan....that means your paying the bank nearly 1/3 of the total loan amount in interest.

Essentially it's like going into a shop taking a £10 bottle of wine and than giving the cashier £13, would you ever do that normally??.....Think of that way, and clear the debt ASAP!!!
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      12-15-2014, 10:20 AM   #20
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Quote:
Originally Posted by gangzoom View Post
Legally they are only allowed to charge early payment penalty of 2 months if you try to clear the whole amount, not sure how it works in your case.

But your numbers are right, because your taking a larger loan, the interest rate drops, so you at getting £2k extra of loan for no extra interest.....But don't think of it as 'free' money.

You are still paying £3000 of interest in total for a £10,000 loan....that means your paying the bank nearly 1/3 of the total loan amount in interest.

Essentially it's like going into a shop taking a £10 bottle of wine and than giving the cashier £13, would you ever do that normally??.....Think of that way, and clear the debt ASAP!!!

He's actually better off taking more money. Its 2600 of interest instead of about 3500. And if he can clear 2k early and reduce that interest he'll probably be down to about 2200 repayable.

Make sure you have read the small print before early repaying though. Not all loans work like mortgage style loans.
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      12-15-2014, 10:45 AM   #21
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For that sort of borrowing the interest should be 6% max
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      12-15-2014, 11:59 AM   #22
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my opinion is you have a problem free car so you say. nothing wrong with it. economical and looks good. keep it. why borrow money that you dont have to buy something better?

wait till you save up enough money - im guessing youll need around an extra 4k for a 335d on top of your 320d so just save save save and buy it! then keep your monthly payments at 196.
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