So, I have recently had a prang and my car was written off. I have received the settlement from the ins co and I’m now looking to get another cheapish car – say up to £5k or so.
The insurance settlement is less than that, so I’m going to have to borrow to make up the rest. No problem with that.
However, I’m seeing massive variations in the cost of borrowing based on the amounts on comparison sites. For example, if we put up £2000 and borrowed £3000, then the interest rate is something like 7%. If we borrow £5000 then it’s 3.5%. If I looked to borrow £7500 then it drops below 3%.
It appears to me the cheapest way to borrow would be to take the £5000 on a fixed rate loan with no early repayment penalties, and then the day after pay back the cash we have from the insurance, leaving a balance that it much lower than we wanted but at the lower rate.
It seems to be to be too obvious, but what is the flaw? I mean, if the lenders have a clause which says they can recalculate the interest based on the outstanding loan, that might cause problems but I’d have thought that is a pretty consumer unfriendly term if there was…