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Baby Get Shaky!
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  #1501978 1-Mar-2016 10:01
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BlinkyBill:
blackjack17:

 

kingjj:

 

 

 

Back to the OP's initial question, we got a loan from GE at 12% a couple of years ago for $6500 on a 2 year term. Like the OP was considering it was for a topup on top of money set aside for a car. We choose to do it this way and pay the bit extra in interest for 2 reasons: 1. We didn't want to replace one cheap car with another and than have to consider doing it again in 2-3 years and 2. We didn't want to raid our savings as we have that set aside to allow my wife to stay home for as long as possible when we decide to expand the family.

 

 

 

OP if you want to get a loan to topup your spending money than do it. It's your guys money and you can do what you want with it. We feel we made the right call for us at the time and got a great modern car that will well outlast anything we could have afforded otherwise. GE money were surprisingly good to deal with (although it did take a week or so to get it all sorted). We negotiated a rate that we were happy with and made it clear we would walk away if we weren't happy. This got us a 12% rate (or more accurately 11.99%) which we were happy with and no establishment or admin fees for the life of the loan. We also negotiated no penalty for early pay back and paid the loan a lot quicker than the 2 year term. All up we probably paid around $600-700 in interest which was worth it to not raid our long term savings account (which earned a comparable amount in interest during that time anyway).

 

 

 

 

 

 

 

 

 

 

Where are you getting 12% on savings?  I want some of that action

 



More like 16% considering income tax. Assuming that savings account is legit, of course.

 

It happened that the account had a large sum of money (in the 10's of thousands).


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  #1502025 1-Mar-2016 11:17
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So you borrowed a small amount of money at a higher interest rate to preserve a larger amount of savings at a lower interest rate, and the net affect, roughly, is your interest paid more or less matched your interest earned. Is that about it?

If so, that's craziness. Just reduce your savings by $6,500, retain the rest, and only EARN interest, which means you are better off.

I must be missing something.




BlinkyBill


 
 
 
 


Baby Get Shaky!
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  #1502038 1-Mar-2016 11:30
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BlinkyBill: So you borrowed a small amount of money at a higher interest rate to preserve a larger amount of savings at a lower interest rate, and the net affect, roughly, is your interest paid more or less matched your interest earned. Is that about it?

If so, that's craziness. Just reduce your savings by $6,500, retain the rest, and only EARN interest, which means you are better off.

I must be missing something.

 

Correct. However taking any money from the savings account would have reduced the interest paid (bonus interest) which would have resulted in a net loss overall (small but worth noting). Taking a loan also has the added side effect of improving our credit rating (not a factor we considered but certainly an added bonus). I appreciate it may come across as 'craziness' but for us it achieved our goals with no negative impact on our financial position.

 

The point I was trying to make was that if the OP wanted to do it this way than you can find acceptable deals and negotiate your way through fees and penalties. Everyone has their own circumstances and putting it on the mortgage/putting it on a CC/cleaning out savings accounts are not always the best way for someone to do it.


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  #1502051 1-Mar-2016 11:36
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kingjj:

BlinkyBill: So you borrowed a small amount of money at a higher interest rate to preserve a larger amount of savings at a lower interest rate, and the net affect, roughly, is your interest paid more or less matched your interest earned. Is that about it?

If so, that's craziness. Just reduce your savings by $6,500, retain the rest, and only EARN interest, which means you are better off.

I must be missing something.


Correct. However taking any money from the savings account would have reduced the interest paid (bonus interest) which would have resulted in a net loss overall (small but worth noting). Taking a loan also has the added side effect of improving our credit rating (not a factor we considered but certainly an added bonus). I appreciate it may come across as 'craziness' but for us it achieved our goals with no negative impact on our financial position.


The point I was trying to make was that if the OP wanted to do it this way than you can find acceptable deals and negotiate your way through fees and penalties. Everyone has their own circumstances and putting it on the mortgage/putting it on a CC/cleaning out savings accounts are not always the best way for someone to do it.



Fair enough.




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  #1504990 2-Mar-2016 14:38
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thanks kinji. her savings are offshore and tied up. its just not feasible.

 

as for 12%, i can answer that one, anyone with their toes in the volatile auckland property bubble has likely achieved that. that is if they can get in and out before a potential pop occurs.

 

it will be funny the day if drawing down on your mortgage costs more % than borrowing. dont say that hasnt occurred before.

 

 

 

 


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  #1505072 2-Mar-2016 16:49
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TeaLeaf:it will be funny the day if drawing down on your mortgage costs more % than borrowing. dont say that hasnt occurred before.

 

 

 

It has? I would think unsecured lending will always be more expensive. 


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  #1505073 2-Mar-2016 16:50
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mudguard:

 

TeaLeaf:it will be funny the day if drawing down on your mortgage costs more % than borrowing. dont say that hasnt occurred before.

 

 

 

It has? I would think unsecured lending will always be more expensive. 

 

 

 

 

It will.


 
 
 
 


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  #1505085 2-Mar-2016 17:24
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May I suggest if you are close to a relative/friend who trusts you, and you plan to pay it off in a shortish period of time AND they still have a mortgage that they can increase - ask if they can take the money out against their house- 4-5% pa. Lots of pitfalls but if the savings are substantial then worth the extra work and 'risks' to the relationship.

 

$7k @ 12% = $840 interest pa, $7k @ 5% = $350. Well may be not enough saving  for the hassle !


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  #1505087 2-Mar-2016 17:31
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ben28:

 

May I suggest if you are close to a relative/friend who trusts you, and you plan to pay it off in a shortish period of time AND they still have a mortgage that they can increase - ask if they can take the money out against their house- 4-5% pa. Lots of pitfalls but if the savings are substantial then worth the extra work and 'risks' to the relationship.

 

$7k @ 12% = $840 interest pa, $7k @ 5% = $350. Well may be not enough saving  for the hassle !

 

 

 

 

I'd have to be pretty desperate to involve family over that kind of saving! ;) 

 

 




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  #1505113 2-Mar-2016 18:22
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yeah when your mortgage's get to 15%. dont be another kiwi and say, that wont happen, it will just plateau rofl. remember the theory of relativity, buy when the apple is falling.

 

the guts of the answer to the question in this thread is 12-18% plus $200-500 in fees.

 

thanks, i never said she will take the finance she just wanted to know what is involved with auto finance as usually she is use to paying cash in europe.

 

finance seems feasible on larger amounts to be written off in tax.




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  #1505118 2-Mar-2016 18:34
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networkn:

 

 

 

I'd have to be pretty desperate to involve family over that kind of saving! ;) 

 

 

 

 

 

 

I tend to agree, plus money and family dont mix in my experience, outside of thrifters. Shes not desperate for cash. It was more assessing income tax vs cash.


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  #1505122 2-Mar-2016 18:38
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BlinkyBill: So you borrowed a small amount of money at a higher interest rate to preserve a larger amount of savings at a lower interest rate, and the net affect, roughly, is your interest paid more or less matched your interest earned. Is that about it?

If so, that's craziness. Just reduce your savings by $6,500, retain the rest, and only EARN interest, which means you are better off.

I must be missing something.

 

 

 

Not unless they have it locked into something like kiwisaver, where they can't withdraw it until they are of retirement age. eg. 67 or 70 (after they rise the age)


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  #1505125 2-Mar-2016 18:43
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TeaLeaf:

 

yeah when your mortgage's get to 15%. dont be another kiwi and say, that wont happen, 

 

 

If mortgage rates get to 15% again then vehicle and unsecured loans will be horrendous. 

 

 

 

TeaLeaf:

 

finance seems feasible on larger amounts to be written off in tax.

 

 

I don't understand this? 

 

I think the original question has been answered. Just be wary of early settlement fees.


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  #1505142 2-Mar-2016 19:21
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and establishment fees

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  #1505147 2-Mar-2016 19:27
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FWIW. You can't question or criticise him/her for not-requiring/requiring the vehicle. There could be any number of reasons why they need to purchase it. E.g. in-practical for kids, maybe they need one that can carry more load etc, it may even be required for work, you don't know the facts.

 

However as many others have mentioned: 

 

1) If you can pay for it out of savings then do that and pass on the loan. You will have to pay a loan setup fee, which could be anywhere from $200~$400. Then the interest on the loan will be about 14%. Your savings is only going to earn 2% or maybe 3% in a saving account from the bank. So after 1 year you will probably have paid up to $1000 more than you would have if you paid for it out of savings.

 

2) If you can't then popping it on a credit card with a 0% interest deal is not a bad idea, provided: 
     a) its not withdrawn as cash from the card then used to purchase the car.

 

     b) you realize that after the 12 month 0% interest thing expires you will will want to pay it off because the CC interest rate is about 20%. Some people have managed to hop to another bank (if that deal is still around with a different credit card) you will have to check the Terms and Conditions.

 

Other than that, compare rates of what is around http://www.interest.co.nz/borrowing/car-loan 

 

If you go to apply for a mortgage in the future, your car will count as an asset. 

 

Good Luck.

 

 


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