Credit Union Car Loan

Arddon

I have a car loan with CU and there is currently 7k outstanding on it with 2yrs & 10mths remaining on the term. I repay approx €300 p/m.

I would like to start saving some money, a sort of rainy day fund...alot of my wages go out on bills

something I am strongly considering is speaking to my CU, and with their agreement, extending my loan back out to 5yrs; the repayments on the 7k are half what I pay at present, €140 p/m...

appreciate some views on this, good, bad or indifferent...

Anyone

Your figures are out, 7k at 300 per month will take aprox 27 mths, not the 34 you state.

Money wise, refinancing the loan will cost you aprox 1,100 euro in interest. My figures are showing your current loan @ 300 p/m will cost 800 interest. Over 5 years, the interest is 1900.

Also, if you refinance, you cant get another loan from the CU until that loan is cleared.

For those two points alone, I wouldnt do it.

Arddon

Your correct Anyone, the figures are out a bit...I pay €300 p/m but the actual required repayment is €260/270...not too sure, would have to check that out...

I am approx €900 ahead on the payments...

You still think I should keep paying the full amount?

It means I cant start saving for another 30 odd months...(30 x €150 = €4500 saved in that time...)

I am not great with finances so maybe you/other see this in a different light!

Regarding another loan...I would hope not to require another loan in this time...but who knows eh?!

Anyone

Arddon wrote: »

Your correct Anyone, the figures are out a bit...I pay €300 p/m but the actual required repayment is €260/270...not too sure, would have to check that out...

I am approx €900 ahead on the payments...

You still think I should keep paying the full amount?

It means I cant start saving for another 30 odd months...(30 x €150 = €4500 saved in that time...)

I am not great with finances so maybe you/other see this in a different light!

Regarding another loan...I would hope not to require another loan in this time...but who knows eh?!

Why not drop your payments to the agreed amount, and save the other 50/60 euro?

With regards to what you "save". Putting that money aside will cost you €1100 euro in interest. Which is a large amount of money.

I can understand you not wanting to take another loan over this period, but given how difficult it is to get credit from the banks, do you think its a good idea to remove the ability to get credit from the credit union?

badgerbroc11

Arddon wrote: »

I would like to start saving some money, a sort of rainy day fund...alot of my wages go out on bills ...

You are saving! The best form of saving which can be done is to clear outstanding loans.

Think about it for a moment - You currently have a loan with an interest rate of approx 10%, every additional €10 you put against this loan you are saving interest at 10%.

If you we're to extend you loan - on one side you would have €10 costing you 10%, on the other side you would have savings which at best you will only earn 1% dividend which after dirt is deducted will only be 0.7%.

The total difference between loan and savings will be a cost to you of approx 9.3%. As I said above use this tenner to reduce your loan and you'll be effectly giving yourself tax free savings of 10%.

You'll clear your loan much quicker and be debt free. Then you'll have an opportunity to build your savings. In the mean time if something goes wrong and you need access to funds the CU will be there to help - after all you will have a fantastic record.