Personal Loan: Can I do this?

[SDX]

I want to take a small personal loan from my bank (HSBC) and I was wondering if anyone could answer a this question?

I want to borrow £2,000 which the HSBC will charge a APR of 21.9%. Is there anything stopping me from borrowing £7,000 at an APR of 4.8% and repaying £5,000 back on the first repayment date? According to the HSBC it okay to make overpayments. Is this possible?

Would be great if we could avoid getting into the rights and wrongs of borrowing money and if I can afford it etc etc

For the record, I can comfortably afford the loan and the repayments without taking food of the table etc nor am I drowning in debt. Cheers guys.

Edited by SDX on Saturday 15th March 17:55

[ringram]

That certainly sounds like the best idea assuming you can get the loan at that rate.

[SDX]

ringram said:

That certainly sounds like the best idea assuming you can get the loan at that rate.

Should be okay in that regard, as long as there is nothing stopping me from doing it.

[WhisperingWasp]

SDX said:

For the record, I can comfortably afford the loan and the repayments without taking food of the table etc nor am I drowning in debt. Cheers guys.

Just checking that you mean you can afford the repayments on the larger loan? Over-paying on a personal loan will reduce the term rather than the payment. So you will be committed to the payments that reflect the £7,000 loan, only you will make a lot less of them of course!

If you had not considered this then just take the larger loan over a longer term as the term is largely irrelevant if you are going to over-pay.

Sorry if stating the obvious.

[SDX]

WhisperingWasp said:

Just checking that you mean you can afford the repayments on the larger loan? Over-paying on a personal loan will reduce the term rather than the payment. So you will be committed to the payments that reflect the £7,000 loan, only you will make a lot less of them of course!

If you had not considered this then just take the larger loan over a longer term as the term is largely irrelevant if you are going to over-pay.

Sorry if stating the obvious.

Not at all. That's helpful thanks, not something I'd considered.

[PurpleMoonlight]

21.9%

Can you apply for a cheap credit card and use that instead?

[WhisperingWasp]

PurpleMoonlight said:

21.9%

Can you apply for a cheap credit card and use that instead?

Fair point. If your intention is to borrow £2,000 over a short period you may be able to get a 0% credit card deal.

Assuming what you want the money for is something you could use a credit card on, ie a second hand car private purchase it would be no good.

[SDX]

PurpleMoonlight said:

21.9%

Can you apply for a cheap credit card and use that instead?

I have no intention of taking on a loan at 21.9% but that's the APR, it's an option to consider, a cheap card that is.

Edited by SDX on Saturday 15th March 18:09

[bugmenot]

Even without knowing how long you are looking to borrow for I know that the monthly repayments will be more than double that of the smaller loan.

There are a few credit cards offering 0% on purchases for up to 18 months at the moment. Have a look at the options on these sites:
http://www.moneysavingexpert.com/credit-cards/best...
http://www.moneysupermarket.com/credit-cards/purch...

[anonymous-user]

Watch the charges on settling the £2000 loan early, often a % of balance.
When paying off eg a 10k Barclayloan I overpaid £9950 one month, then paid the last £50 the next month to close, only paying a % penalty on the closing balance of 50...

[speedy_thrills]

And any application fees of course (sorry, don't deal with UK bank so unsure if this is standard practise).

[mike-r]

I did this with a Halifax Personal Loan last year. Beggars belief really but yes you can do it.

[Fotic]

Why don't you just borrow £2k from a different bank?

[K12beano]

Fotic said:

Why don't you just borrow £2k from a different bank?

Or even peer-to-peer like Zopa etc....?

[Zoon]

Why am I not seeing the benefit of doing this?
Please explain.

[mike-r]

Zoon said:

Why am I not seeing the benefit of doing this?
Please explain.

Interest rates vary with the amount borrowed.

Borrowing £2000 over 48 months @ 29.9% = £1,263.04 in interest

Borrowing £7000 over 48 months @ 5.9% = £858.56 in interest

[andye30m3]

Jimboka said:

Watch the charges on settling the £2000 loan early, often a % of balance.
When paying off eg a 10k Barclayloan I overpaid £9950 one month, then paid the last £50 the next month to close, only paying a % penalty on the closing balance of 50...

I didn't think they were allowed to charge fees for over paying or paying off personnel loans anymore

[zedx19]

I plan on doing something very similar to this, just with a company called Zopa. I spoke with them and asked this question, they said its perfectly fine. No early repayment fees with Zopa but they do have a small setup fee.