# Early Loan Settlements



## Glasgow_Gio (Mar 24, 2008)

I'm thinking about paying off the remaining balance on a loan i took out to purchase my car. I contacted Blackhorse with whom i took out the loan, to get a settlement quote and i'm not that impressed at the amount i'd save by paying it off early. 

I am only 13 months into a whopping 60 month repayment agreement and thought that during the current economic climate, financial institutions would be bending over backwards to get more money in. Or is it the fact that over the remaining 47 months they see the profit they will make from interest as being more important?

My questions to the financial guru's that post here is........ Is there any tips or advice you can give that will make me get a better settlement figure?


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## 1animal1 (Aug 20, 2008)

nope, the settlement terms will have been set when you signed the contract (max they can charge is two months interest on a regulated agreement under 25k loan from my understanding) .... if your taking a personal loan to pay a car loan and theres not much benefit in terms of payment...consider the halves and thirds rule, main part is that once you own 50% of the car then you can hand it back to the finance company as long as its in reasonable condition without fear of harming you credit rating.... even if your in negative equity..... that firm will most likely not touch you again but their are plenty of finance places out there for the future. - worth considering, however if you have the money to pay it off consider both options


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## Jakedoodles (Jan 16, 2006)

Personally I'd pay it off even without favourable terms. At least then you don't have the years of monthly payments to worry about. When I was much younger (18iirc) I borrowed 5k to buy my first car. After nearly two years, I went in to pay it off, and the amount I had to pay them, after paying £185pm for nearly two years, was £5,800. Ridiculous, but it was rid of, and I didn't have monthly payments to worry about in the future.


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## 1animal1 (Aug 20, 2008)

like i said, if you have the money it still may be worth considering the halves and thirds...... depends what the saving is


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## richjohnhughes (Sep 24, 2007)

you are one year into a 6 year term - most of the money you have paid so far will have been interest and a small amount of capital. 

your car will not be worth what you owe on the loan. if you have the money to add and settle the loan then go for it. 

another poster mentioned that there is a chance of harming your credit rating if you are in negative equity. dont think this is true. your credit rating will only be harmed if you miss a payment on the loan. 

normally after 3 years of your 6 year term, it becomes financialy possible to sell the car and settle the loan without having to add anything yourself. but in these times, who knows.


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## Glasgow_Gio (Mar 24, 2008)

Cheers for the replies. Not in negative equity or close to it (right now anyway lol) 

I'll have a look into it. I may even look to sell the car privately to cover the settlement cost and then just buy another car. So many options running through my head so i'll sit down and do the maths i think

thanks for the advice guys.


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## Jakedoodles (Jan 16, 2006)

A friend of mine (who has a few quid) buys supercars on finance, runs them for 6 months or so, then sells them for more, or the same as he paid for them, and pays off the finance. Doing it this way, if you've got a low risk category (so can get low APR), it actually works out as cheap to buy supercars than to buy something like a Mondeo. The only trick being that you need the money in the first place.


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## 1animal1 (Aug 20, 2008)

no i was referring to halves and thirds, if the car is in negative equity by the time you've paid 50% of the original loan off, then you can simply hannd the car back without harming your credit rating.....say you buy an Astra for 20k over 5 years, 2.5yrs down the line your car will be in neg eq, just hand it back to finance firm....ssimple as that


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## richjohnhughes (Sep 24, 2007)

1animal1 said:


> no i was referring to halves and thirds, if the car is in negative equity by the time you've paid 50% of the original loan off, then you can simply hannd the car back without harming your credit rating.....say you buy an Astra for 20k over 5 years, 2.5yrs down the line your car will be in neg eq, just hand it back to finance firm....ssimple as that


sorry to hijack your thread mate -

1animal1 - are you sure thats right? i have never heard of this before - as far as i knew, the loan company couldnt give a bugger if your car was in neg eq. or not. they just want to you to repay the loan.

?


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## 1animal1 (Aug 20, 2008)

100% Rich.... confirmed through a mate whoos a sales manager ata local car dealer, was origianlly sold to me as an option yeasr ago by an Audi financial fella who thought it would sway me off contract hire

best bet is doing a search on google.... its called the halves and thirds rule

obviously they dont like people doing it or advertise the fact


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## Glasgow_Gio (Mar 24, 2008)

The halves and thirds rule does impact on your credit rating


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## APK (Oct 6, 2008)

I've heard of this, where does the thirds bit come in?

So somebody doing a high annual mileage, could in theory buy a car on say 5/7 year finance, and return it after 3 years with 150,000miles on when it would be worthless and walk away, effectively having got the car for halve price?


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## Glasgow_Gio (Mar 24, 2008)

I believe that after you have paid a third of the vehicles value the finance company cannot reposses the car without a court order. Hence the third rule.

Also with your 150k theory...no. They take the car and sell it at auction. If the car doesn't cover the vaule owed then you are still liable for the remaining balance. ( i believe under voluntary return)


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## 1animal1 (Aug 20, 2008)

nope thats not the case from my understanding, it doesnt affect your credit rating, yes it gets noted on it but not at any level that would affect your rating..... i met someone years ago that did it very often 1-2 yrs at a time, the only downside was not being able to use THAT finance company again as they had the heads up on the fella from previous experiance....

the remaining balance is completely wiped, auction or no auction, otherwise theres no reason to have the rule in the first place, if the cust cant afford it and they hand it back before the halfway period, the finance comp would take them to court most likely..... if your giving it back under 'halves' and you are liable for the remainder they would have to take you to court then too.... so renders the whole thing pointless

the secret is the fact that the loan is secured to the car not the person, if your home gets repossessed they dont come to you for the remainder as they lent the money with the home as security and took the risk accordingly through their LTV's - same concept


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## Alex L (Oct 25, 2005)

A couple of years ago I was able to pay off the remainder of a loan from the Blackhorse and I asked if there was any discount for paying it off early and I saved myself about £600 from what I owed. so worth asking them.

I also paid off another debt (one that had been taken over by debt collections company ) and they offered a similar discount, though said that even though the debt would be cleared it would show up on my credit report as about £300 owing (I was emmigrating so that didn't worry me).


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## APK (Oct 6, 2008)

1animal1 said:


> the secret is the fact that the loan is secured to the car not the person, if your home gets repossessed they dont come to you for the remainder as they lent the money with the home as security and took the risk accordingly through their LTV's - same concept


Not quite right, if your home is repossesed, then you are still responsible for any shortfall, even if the lender has taken a MIG policy out then the insurer will then seek to recover the shortfall from you.


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## 1animal1 (Aug 20, 2008)

APK, ah think you have me here, although not entirely sure how far they could take action... i do know with the cars it is different for certain


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