How to move a car loan?

pooch90

I'm just wondering is this common practice?
We currently have our loan with a finance company paying a higher APR than I could get in a credit union. Can I approach the credit union to take over this loan?
Are there any downsides to this? (Basically can car finance company fine me for ending the loan early?) We have about 2.5 years left on the loan.

Jim2007

Perhaps you can start by establishing the type of agreement you have with the finance company: https://www.ccpc.ie/consumers/money/loans/paying-for-your-car/hire-purchase/

coylemj

pooch90 wrote: »

Can I approach the credit union to take over this loan?

It doesn't work like that. You cannot 'move' a loan. What you can do is borrow money from Peter to pay Paul but Peter and Paul will have no dealings with one another.

pooch90 wrote: »

Are there any downsides to this? (Basically can car finance company fine me for ending the loan early?) We have about 2.5 years left on the loan.

There possibly is a downside, you could end up paying interest on the double.

If the finance company have frontloaded the interest onto the capital, you will end up paying them the same amount at the end of the day, whether you continue making the monthly payments or if you pay off the loan early with a lump sum. If the interest was frontloaded, it becomes part of the outstanding balance from day one so you will end up paying interest for the full term one way or the other. Meaning that if you borrow money from a credit union or your local bank and use that money to pay off the car loan, you will be paying interest on interest. Which is not a good idea. Put simply, if the interest was frontloaded, you're stuck with the loan and there is no financial benefit in paying it off early.

If the interest was not frontloaded, you should be able to get a statement showing the current balance and you also need to ask them if there are penalties for early settlement.

pooch90

coylemj wrote: »

It doesn't work like that. You cannot 'move' a loan. What you can do is borrow money from Peter to pay Paul but Peter and Paul will have no dealings with one another.



There possibly is a downside, you could end up paying interest on the double.

If the finance company have frontloaded the interest onto the capital, you will end up paying them the same amount at the end of the day, whether you continue making the monthly payments or if you pay off the loan early with a lump sum. If the interest was frontloaded, it becomes part of the outstanding balance from day one so you will end up paying interest for the full term one way or the other. Meaning that if you borrow money from a credit union or your local bank and use that money to pay off the car loan, you will be paying interest on interest. Which is not a good idea. Put simply, if the interest was frontloaded, you're stuck with the loan and there is no financial benefit in paying it off early.

If the interest was not frontloaded, you should be able to get a statement showing the current balance and you also need to ask them if there are penalties for early settlement.

Thank you for this.
It makes a lot of sense. I've never had a loan before so I'm very naive in this respect.

We got a good rebate from Revenue during the week and want to get mortgage ready so I'm just trying to see if we can cut down this debt/restructure it to get it gone faster. Even if they let me increase payments it would help.
It's our only monthly commitment.

I'll get in touch with them and see if I can get the statement from them.

coylemj

pooch90 wrote: »

I'll get in touch with them and see if I can get the statement from them.

If the outstanding balance equates to the aggregate of the remaining payments, it means the interest was frontloaded. In which case there is no good financial reason to pay the loan off.

From the financial perspective, if the balance is the same as what you will pay them in monthly repayments, that means that the effective APR on the outstanding balance for the remainder of the loan is 0% so under no circumstances should you borrow to pay them back with a lump sum. Because unless you can find someone to lend you the money interest-free, you will end up paying more than if you just keep making the current repayments.

pooch90

Thank you so much. That makes a lot of sense.

368100

Ok in addition to the above you should look at the type of interest rate you're on.
Most hire purchase / leasing / PCP agreements are done on fixed rates and these normally carry breakage fees that will be applied if it is repaid before the end of original term