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A Fin24 user wants to know if it would be wise to settle his vehicle loan from money in his flexi-bond account. He writes:
I have a flexi-bond on a property and was thinking of settling my vehicle debt (which has a higher interest rate). I will obviously pay the amount owed monthly on the vehicle directly back into the bond after settlement.
There is a three-year term left on the vehicle, and the amount needed to settle is R114 000.
Is this a wise decision, or should I keep things as they are currently?
Peter Atkinson, national technical portfolio manager at the Financial Intermediaries Association of Southern Africa, responds:
The answer to this question appears clearcut, namely to go ahead and settle the vehicle from the available capital in your flexi-bond account.
However, there are a number of factors to consider before making the decision.
First: will the early settlement of the vehicle loan result in penalties? If yes, then it would probably be best to continue paying the vehicle loan to its full term. If no, then consider the next point.
Second: how much is available in your flexi-bond account? A flexi-bond can come in handy during times of crisis.
It would probably be unwise to dip into your flexi-bond account to settle your motor vehicle loan if this would completely deplete the additional funds available to you.
If you run into a crisis at a later stage, you will not be able to raise extra cash by refinancing your vehicle.
If sufficient funds remain after settling the vehicle - and provided you have the discipline to continue paying the current vehicle instalment back into the flexi-bond account - you can proceed.
But bear in mind that the financial benefit may not be as significant as you expect.
Third: the financial benefit in settling the vehicle out of the flexi-bond account cannot be calculated without additional information, more specifically the interest rate and fees on the vehicle loan account and the interest rate and fees on the flexi-bond account.
This calculation would in any event prove futile if you fail, for any reason, to "repay" the flexi-bond account.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
I have a flexi-bond on a property and was thinking of settling my vehicle debt (which has a higher interest rate). I will obviously pay the amount owed monthly on the vehicle directly back into the bond after settlement.
There is a three-year term left on the vehicle, and the amount needed to settle is R114 000.
Is this a wise decision, or should I keep things as they are currently?
Peter Atkinson, national technical portfolio manager at the Financial Intermediaries Association of Southern Africa, responds:
The answer to this question appears clearcut, namely to go ahead and settle the vehicle from the available capital in your flexi-bond account.
However, there are a number of factors to consider before making the decision.
First: will the early settlement of the vehicle loan result in penalties? If yes, then it would probably be best to continue paying the vehicle loan to its full term. If no, then consider the next point.
Second: how much is available in your flexi-bond account? A flexi-bond can come in handy during times of crisis.
It would probably be unwise to dip into your flexi-bond account to settle your motor vehicle loan if this would completely deplete the additional funds available to you.
If you run into a crisis at a later stage, you will not be able to raise extra cash by refinancing your vehicle.
If sufficient funds remain after settling the vehicle - and provided you have the discipline to continue paying the current vehicle instalment back into the flexi-bond account - you can proceed.
But bear in mind that the financial benefit may not be as significant as you expect.
Third: the financial benefit in settling the vehicle out of the flexi-bond account cannot be calculated without additional information, more specifically the interest rate and fees on the vehicle loan account and the interest rate and fees on the flexi-bond account.
This calculation would in any event prove futile if you fail, for any reason, to "repay" the flexi-bond account.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
