YOUR MONEY: Drive a hard bargain if you transfer your loan
A reader asks whether it makes sense to move vehicle finance from one bank to another where the interest would be lower but the term longer
14 November 2024 - 05:00
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
My vehicle finance charge is 12.75%, and with 52 months to go the instalment is R4,339. Another bank is offering a 10.5% loan over six months at R3,691 to refinance it, as I qualify for one of its bank accounts and a perk of that account is preferential rates.
Yes, the interest is lower, but the term is longer and so more interest will be paid.
If I ask for a reduced term the interest rate is lower, and so is the interest, because of the shorter term. But the instalment will then be the same due to additional fees being added when refinancing — an initiation fee and another fee that will be added to the principal amount (not much, but when paid over that period it makes a difference). I’m in two minds.
— A Fat Wallet Facebook community member
Answer:
My first thought is to contact your existing lender and ask for a reduced rate, showing the bank that you have a competing offer at a lower rate.
If your existing lender won’t budge, there isn’t much point in transferring the loan, as there’s no benefit to you.
That said, your new bank will appreciate the business and as such see you as a “better customer”. This may bring benefits in time, for example a better home loan due to your having multiple products at the same bank. The bank may also have a rewards programme that you will get more from as a result of the vehicle loan.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
READER QUESTION OF THE WEEK
YOUR MONEY: Drive a hard bargain if you transfer your loan
A reader asks whether it makes sense to move vehicle finance from one bank to another where the interest would be lower but the term longer
Question:
My vehicle finance charge is 12.75%, and with 52 months to go the instalment is R4,339. Another bank is offering a 10.5% loan over six months at R3,691 to refinance it, as I qualify for one of its bank accounts and a perk of that account is preferential rates.
Yes, the interest is lower, but the term is longer and so more interest will be paid.
If I ask for a reduced term the interest rate is lower, and so is the interest, because of the shorter term. But the instalment will then be the same due to additional fees being added when refinancing — an initiation fee and another fee that will be added to the principal amount (not much, but when paid over that period it makes a difference). I’m in two minds.
— A Fat Wallet Facebook community member
Answer:
My first thought is to contact your existing lender and ask for a reduced rate, showing the bank that you have a competing offer at a lower rate.
If your existing lender won’t budge, there isn’t much point in transferring the loan, as there’s no benefit to you.
That said, your new bank will appreciate the business and as such see you as a “better customer”. This may bring benefits in time, for example a better home loan due to your having multiple products at the same bank. The bank may also have a rewards programme that you will get more from as a result of the vehicle loan.
— Simon Brown, Just One Lap
YOUR MONEY: The taxing matter of rent
YOUR MONEY: Go global or stay in the US?
YOUR MONEY: Still some decent returns on cash
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.