Cheapest way of settling/opting out of HP agreement

[passat]

I have a hire purchase agreement with a financial institution for a car loan for the amount of E31,200 over a 5 year term, monthly repayment E603.00 fixed, total repayment E36,180.00 to date i owe E25,326.00 and with 42 months left on payment. Are there any cheaper monthly options of paying this amount off.

Thank you

 

[corcaigh2008]

Re: Car Loan

You could talk to Tesco, they offer low rate fixed term loans. and no penalty if you decide to pay it off early

 

[Tadhgin]

Re: Car Loan

Speak to your local credit union - rates vary. My local credit union charges 7% per annum, no charges or fees, no penalties, free Loan Protection cover....

 

[bacchus]

Re: Car Loan

Did you check the cost of opting out of your HPA? You may have a bad surprise and it may not be worth it trying to get a cheaper loan elsewhere.

HP are to be avoided like the plague IMO.

 

[ClubMan]

Re: Car Loan

Speak to your local credit union - rates vary. My local credit union charges 7% per annum, no charges or fees

You may need to keep money on deposit/in shares while borrowing from a CU and even though this money will probably earn interest/dividends having to do this may inflate the cost of credit further while not being reflected in any APR quoted.

free Loan Protection cover....

"Free" loan protection is paid for by the CU which, as a member owned organisation, means that ultimately the members bear the cost albeit indirectly.

 

[Basildog]

Re: Car Loan

A sizeable number of Credit Unons offer car loans at between 7% and 7.5% APR. On top of this many also give you back an interest rate rebate, on the interest you have paid, at the end of each year. This further reduces the cost of yoou loan. At a rate of 7.5% APR, the true APR, after applying say a 10% Interst rebate, works out at around 6.7%. This is a good rate.
In addition, these Car loans are covered by Free loan protection Insurance, which means your loan will be cleared in full, if you die. I accept, that although ‘free’ to the member, there is a cost borne ultimately by all members . However, taking into account that only 30% of Credit Union members actually borrow, the cost is spread accross the savers and borrowers alike.
The notion that you have to have savings in a Credit Union before you can get a loan in a Credit Union is far out-dated. Many Credit Unions have abandoned this practice years ago, and now rely on the members ability to repay the loan, and their capacity to repay, as the ultimate decider on whether to grant a loan or not. There are, however, many members who are quite happy to either leave their savings in their Credit union, and also borrow at the same time, or else borrow, and continue to both save and repay their loan
Credit Union loans are also personal loans, which means you own the car, and are not subjected to the adverse terms of hire purchase or lease agreements

 

[CCOVICH]

Re: Car Loan

Basildog and Tadhgin-are either or both of you employed by Credit Unions?

If so, please disclose that fact when recommending Credit Union products.

Thanks.

And by the way, this is a question of fact-what is the cheapest method of settling a hire purchase agreement-the OP isn't looking for another one, so no need to mention:

Credit Union loans are also personal loans, which means you own the car, and are not subjected to the adverse terms of hire purchase or lease agreements

If credit union members can indeed go in to their local credit union, borrow at

a rate of 7.5% APR, the true APR, after applying say a 10% Interst rebate, works out at around 6.7%. This is a good rate.

then that is indeed a good rate, and is worth checking out. Can anyone (let's say the original poster) just walk in off the street without savings and get a loan at these rates?

 

[Basildog]

Hi CCOVICH. Yes, I have to admit a conflict of intersest.
Unfortunately, in settling a Hire Purchase agreement, you will be charged a penalty interest for breaking out early from a fixed rate contract. Banks have complex formulas in arriving at the level of penalty interst charged on the settling of an account. My advice to you would be to meet with your Bank manger, after having obtained a settlement figure on you loan, and offer the manager a reasonable settlement amount to clear your loan. Say that this is all you can afford and play hard ball. You may suceed in obtaining a ‘discount’, depending on the manager’s percieved risk to the Bank in the event you start defaulting on the total loan balance. He/She may be quite pleased to get out of the deal.
As to your last question, many customers can go to their local credit union and join up to become a member for a very small nominal amount, usually around €5 to €10 euro. Credit Unions are restricted to a certain area that they can attract members from. This is known as their ‘Common Bond’, and is usually the area within a five to six mile radius of the local union, alhtough some areas are larger. The common bond can also apply to a specific ‘industry’, for example, the Gardai, Health Service Workers, who can attract mebers from anywhere.
Once joined, you can apply for a loan. Again, most credit uninos will look at your ability to repay ( Income), credit History, capacity to borrow (level of other borrowings), willingness to repay and purpose of loan. Security may be required for large loans. Your level of savings should not affect your ability to borrow. You do not have to have savings (except the small entrance amount) to get a loan. This point may not be true for some small credit unions. Credit Unions do encourage member to save and many people are quite happy to repay a loan account and also save seperately. Note, however, that this should be done in a seperate savinga account. If you use your loan account to also save money ( seems odd, I know), any savings you have in this ‘dual’ account will be used as colateral against the loan, and is hard to withdraw.

 

[ClubMan]

Credit Unions do encourage member to save and many people are quite happy to repay a loan account and also save seperately. Note, however, that this should be done in a seperate savinga account. If you use your loan account to also save money ( seems odd, I know), any savings you have in this ‘dual’ account will be used as colateral against the loan, and is hard to withdraw.

Saving while carrying debt is often not the most cost effective or prudent way to manage your money. Many CUs don't point this out to members. Some don't even understand the issues in my experience. To be fair this is no different from other financial institutions' tied agents on whom one should not depend for independent, professional advice in your best interests. On the other hand as a member owned organisation one might expect better...

 

[Basildog]

I agree, Clubman, that some Credit Unions do not point out to their members that their savings may be tied up against their loan. Others, however, who have substantial surplus funds, are only too glad to see the member take out their money, or else borrow a lesser amount and use up their savings. Surprisingly, however, the majority of members elect to leave their funds in place - even if the cost anomoly is pointed out to them

 

[CCOVICH]

Ok so, it seems to be the case that the OP could join a CU in their area and take out a loan at what appears to be a competitive rate.

They could use this to settle the HP agreement currently in place.

And they should negotiate a settlement with their HP lender as the cost of settlement is likely to be quite high (a significant chunk of the future interest is likleto be have to be repaid).

So, can we leave the 'why it is good to borrow from a CU' discussion for a separate thread please-as it seems there could be quite a bit of debate on that question.

Thanks.