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Hire purchase - early payment breakage fee

  • 08-07-2015 5:00pm
    #1
    oheilis
    Registered Users, Registered Users 2 Posts: 79 ✭✭


    Hi folks,

    Looking at whether to take a loan or HP for a car purchase at the moment.

    Am likely to redeem early so the bank are trying to push me down the loan route, but the rates are much higher. Was asking them how the early repayment fee would be calculated if I went HP and they gave me an answer that suggested they didn't know ("we wouldn't recommend it, wouldn't be able to tell you until you actually went to redeem the HP agreement" etc)

    Anyone know how HP early repayments are typically calculated?

    Tks


Comments

  • #2
    Murphster
    Registered Users, Registered Users 2 Posts: 77 ✭✭Murphster


    oheilis wrote: »
    Hi folks,

    Looking at whether to take a loan or HP for a car purchase at the moment.

    Am likely to redeem early so the bank are trying to push me down the loan route, but the rates are much higher. Was asking them how the early repayment fee would be calculated if I went HP and they gave me an answer that suggested they didn't know ("we wouldn't recommend it, wouldn't be able to tell you until you actually went to redeem the HP agreement" etc)

    Anyone know how HP early repayments are typically calculated?

    Tks

    Hi,

    If possible, I would advise that you go down the loan route. I can only speak from my experience with HP and its a Dick Turpin job! I took out a HP loan agreement with BofI over 4 years.

    They front load the interest charged at the start of the loan bumping up the total amount borrowed, and then proceed to spread the repayments out evenly over the duration of the loan - or so I thought!

    I was 2.5 years into a 4 year HP on car finance when I decided to clear the loan. I presumed that I would be entitled to have the interest which was charged at the start for the remaining 1.5 years to be deducted from the outstanding amount to give me a settlement figure.

    I was told that with 1.5 years to go on the loan, I would get about €150 back rather than about €900 ... this means that every repayment you make for at least the first 2 years of the 4 year agreement is ALL interest, meaning that once you settle later on in the agreement there is no benefit. You have effectively paid interest on the borrowed money even though you plan to pay off the remaining borrowed money.

    Personal loan all the way if you can or better still use the Credit Union and steer clear of the banks!


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