Lower monthly payments/payment period of your car

[LilJohn]

I've just been to Nedbank branch to inquire about Ned Credit.

According to consultantants at Nedbank, if you put in a certain sum of money into you nedbank account which is linked to your nedbank vehicle finance account you could decrease the payment period by half depending of course on how much you put in your account.

They did calculation for me based on these figures:
Vehichle Purchase R283 000 - Deposit R40 000 = Amount Loaned of R243000
Interest Rate of 12.5 prime/Current repayment period = 72 months.

Now if I were to put in R100 000 in Nedbank Account for example. It would bring my repayment period to 42 months technically....meaning that after 42 months I would be left with R100 000 oustanding On the first month of having deposited the R100 000 my interest rate would go from 12.5 to 7.5 which reduces every month.

My question is has any of you guys used Ned Credit and are the true benefits to be ripped from this scheme/service?

 

[koeks]

sounds too good to be true...

 

[undesign]

I've just been to Nedbank branch to inquire about Ned Credit.

According to consultantants at Nedbank, if you put in a certain sum of money into you nedbank account which is linked to your nedbank vehicle finance account you could decrease the payment period by half depending of course on how much you put in your account.

They did calculation for me based on these figures:
Vehichle Purchase R283 000 - Deposit R40 000 = Amount Loaned of R243000
Interest Rate of 12.5 prime/Current repayment period = 72 months.

Now if I were to put in R100 000 in Nedbank Account for example. It would bring my repayment period to 42 months technically....meaning that after 42 months I would be left with R100 000 oustanding On the first month of having deposited the R100 000 my interest rate would go from 12.5 to 7.5 which reduces every month.

My question is has any of you guys used Ned Credit and are the true benefits to be ripped from this scheme/service?

I worked for Nedbank Business Bank years ago, memory is bit sketchy, but it goes something like this -

NedCredit is basically an "access type" facility, but works as a seperate bank account linked to your finance account (it is actually a current account).

You then basically earn the same interest rate on the NedCredit account as the actual finance account - simulating a normal access facility. Iirc you can choose to apply the interest earned to the installment i.e. you pay less every month but the term stays the same (72), or you pay the original payment, but accrue interest on the NedCredit account. Effectively after say 42 months your NedCredit balance will be the same as the outstanding finance so you can settle if you want to.

Just be aware that with the new Basel II regulations being implemented, Nedbank has changed their NedCredit product during the last month or so - there is now a 1.25% (not sure of the exact %) penalty on NedCredit to compensate for cost of capital that has to be held on NedCredit balances.

If your finance rate is 12.5% your NedCredit rate will be 12.5% less 1.25%.

The true benefit is the same as any access facility - you can effectively save at an after-tax rate equal to your finance rate.

 

[LilJohn]

I worked for Nedbank Business Bank years ago, memory is bit sketchy, but it goes something like this -

NedCredit is basically an "access type" facility, but works as a seperate bank account linked to your finance account (it is actually a current account).

You then basically earn the same interest rate on the NedCredit account as the actual finance account - simulating a normal access facility. Iirc you can choose to apply the interest earned to the installment i.e. you pay less every month but the term stays the same (72), or you pay the original payment, but accrue interest on the NedCredit account. Effectively after say 42 months your NedCredit balance will be the same as the outstanding finance so you can settle if you want to.

Just be aware that with the new Basel II regulations being implemented, Nedbank has changed their NedCredit product during the last month or so - there is now a 1.25% (not sure of the exact %) penalty on NedCredit to compensate for cost of capital that has to be held on NedCredit balances.

If your finance rate is 12.5% your NedCredit rate will be 12.5% less 1.25%.

The true benefit is the same as any access facility - you can effectively save at an after-tax rate equal to your finance rate.

Thanks SiriS all that matters to me is that I am able to save money, instead of having the money seat in my account with now benefits.

SiriS...if you had to campare this method(Ned Credit) with the option of just taking the R100 000 and putting it all towards settling the financed amount...which one would you say has greater benifits?

 

[PetrolHead]

surley the option to lower the total amount owed for the car would be the best deal as they charge you interest on the total amount outstanding don't they?

if yes, then the interest on R 243 000 is alot more than on R 143 000.

 

[undesign]

Thanks SiriS all that matters to me is that I am able to save money, instead of having the money seat in my account with now benefits.

SiriS...if you had to campare this method(Ned Credit) with the option of just taking the R100 000 and putting it all towards settling the financed amount...which one would you say has greater benifits?

Difficult to say LilJohn - what do you want to achieve?

1) if you settle the R100 000 against your finance, you won't be able to spend it on anything else - good thing, but bad for emergencies I guess

2) your payment will decrease - good thing for monthly cash flow, and bad for saving unless you have a lot of discipline. You can always ask them to increase the installment or shorten the term.

If you feel you have enough self-discipline I would use rather use the NedCredit account, and keep paying the normal instalment. That way you are saving substantially on the R100,000 "deposit" by earning a great rate on the R100k and effectively shortening the term to 42 months, but it is also available in case of emergency.

 

[undesign]

surley the option to lower the total amount owed for the car would be the best deal as they charge you interest on the total amount outstanding don't they?

if yes, then the interest on R 243 000 is alot more than on R 143 000.

Doesn't matter -

paying 12.5% on R243k, but earning 12.5% on R100k = paying 12.5% on R143k

(I'm ignoring the 1.25% penalty for sake of argument)

 

[koeks]

i'm lost

 

[PetrolHead]

the best solution is . Drive your old car until is falls apart. Have no debt and invest the 100k until that affords you a nice car cash. NO DEBT!!