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axel132132

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Hi all

I have looked on internet and have not been able to find anything to answer my question so ima post it here cheers

I have a 5k Loan, i hear that if you pay it off early you have to pay an extra month which is bizzare so if i have to pay 5k back id actually have to pay like 5200..

I have the 5k in my account would i be better transferring the money to another bank account + transfer the direct debit to that account and just leave it all to pay itself off then id get interest on my 5k + pay 5k back instead of more..

Is this right?

Cheers
 

topquark

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Every loan agreement has it's own terms/conditions Axel, so it will depend what those terms are.
 

snowhead

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You could end up paying far more than 1 month penalty.

The only people who can tell you the actual costs are the people that lent you the money.

Look at it the other way round, if you had lent someone some money and were expecting interest back on the the loan, you'd want compensation for them paying off early.
 

RogertheBodger

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Hi Axel.
Why don't you get in touch with your loan provider and ask them for a settlement figure, at least you will then know what you are faced with. If you have a loan with monthly repayments, then the amount you will have repaid by letting the loan run it's course will be far more than £5200. I doubt very much that the interest you would earn by keeping the money in a savings account would be greater than the monthly interest on your loan.
 
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axel132132

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I borrowed 7500, so they said i owe like 9000 with interest, ive been paying it off now for about 2 years so now i dunno what i owe i just pay it off but my settlement figure is £4663.84 - They said i pay 30days interest ontop of what i owe.

So basically im better off setting up an account with say Halifax - Get £100 for opening account, transfer £4500 (Or work out exactly what i have left to pay by asking how many more months) and then just transfer the direct debit to that account that way im getting £100, + interest on what i transfer + not paying the extra 30 days so surely this is better right?
 

trev

Regular EF Member
Axel, have a think about this and its pretty easy to work out. Your settlement figure as at today's date is £4663.84 + whatever 30 days interest is, now take your monthly payment and multiply it by the number of months left to run to give you the amount you will pay if the loan runs it's full term. Whatever is the cheapest course of action, take it.
It's incredibly unlikely that any account will give you enough interest in your £5k lump to break even
 
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axel132132

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Umm im crap with money, I pay £187.35 a month, would the 30 day interest be the % APR of what i have left to pay or a % APR of the full amount?

So what you saying im better paying it all at once? Or open a new account?

I think open a new account due to getting £100 + not paying the 30 day interest + getting interest (wether it only be £20 over 2 years)

Cheers
 

trev

Regular EF Member
Contact your loan provider and ask them what the 30 day interest amounts to and add that to the £4663 figure they gave you this will give you a total settlement figure. I can pretty much guarantee it'll be cheaper to pay the loan off now.
You can the take that £187 each month and either put it into some sort of investment or a pension
 

oldtimer

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The thing is you borrow money because you need it and they tell you how much a month for the next ?? years only problem is that if you want to pay it off early you will still pay the same unlike the mortgage where as long as you are not in a special deal they give you a cost and you pay it.

Although I am not try to give you a lecture but you need to get more money savvy I remember years ago I asked for a loan through my then business account and they said no you have to take a Scotloan as it was called at the time so I asked how much will I pay back for both loans the difference was massive as the Scotloan was more like a credit card loan so I said give me the loan through my business account or I will go elsewhere and it worked a treat but since then 26 years ago I have never taken out anymore loans so if I need a motor I buy it at 6 months old at the auctions for 60% of the forecourt price then I save £100 a month and 8 years later have run the car into the ground I have £9600 to back to the auctions. So get savvy shop around and dont run a deficet on your credit card as I said to my daughter would you pay £700 for a £400 TV and she said no but who would be daft enough to do so I said anyone who puts it on a credit card yes she has one but like me its cleared every month
 
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axel132132

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I can do maths sums, i have a A level in maths.. And a A in GCSE maths

My issue is working out how loans work, ive never done them before so no idea but apparently you pay the interest first.. So its better to pay it off monthly with £100 for opening account than paying off at once and having settlement figure.
 

UNG

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Umm im crap with money, I pay £187.35 a month, would the 30 day interest be the % APR of what i have left to pay or a % APR of the full amount?

So what you saying im better paying it all at once? Or open a new account?

I think open a new account due to getting £100 + not paying the 30 day interest + getting interest (wether it only be £20 over 2 years)

Cheers
How many more months are you paying £187.35 for this could provide the answer to your dilemma to pay it off or not to pay it off
 

Johnuk

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just ring them up, they would tell you,

if u have ppi on the loan, go to that martin guys web site from daybreak, he has free guide and letters to send so if you do have ppi insurance you claim 100pct back, if you got throw a company they take 40 to 60 pct of the ppi you get back

i did it my self and got 100pct back
my mate did the same throw a company they taken 40pct of wot he got lol
 

darkwood

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Just a point out here axel, the loan is designed by a team who specialise in making profit by lending money with interest and/or clauses and penalties..... i very much doubt you can find a way of transfering the money into another scheme or system as so to break even, if this could be done it would effectively be a interest free loan and if you who openly admits they dont understand how it all works could achieve this then any money minded pro' could take advantage of such a scheme and render the whole banking system useless. This is why you have penalties for early settlement etc etc they are protecting the structure of the loan and making sure people dont get low interest loans and repay straight off as it wont be worth their time and effort setting it all up.
Its the same with mortgages, you could in effect get a mortgage at one rate but 3months down the line a better mortgage provider could offer better rates and you transfer mortgage but first mortgage company has barely made enough interest to cover all their processing and legal fees, this is why they attach a early repayment penalty to cover their backs and make sure they make a pre-determined minimum profit from you.
 

oldtimer

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I can do maths sums, i have a A level in maths.. And a A in GCSE maths

My issue is working out how loans work, ive never done them before so no idea but apparently you pay the interest first.. So its better to pay it off monthly with £100 for opening account than paying off at once and having settlement figure.
Having a A level does not mean squat let me explain I read a Sunday newspaper and got to the Money section and they were interviewing a couple who had a £150k mortgage £20K car loan and £40k on credit cards and she was a financial officer of a company so its not about maths it is all about shopping around so you need £6k and you want to pay it over 4-5 year well find out how much you pay a month then get the total sum for that period and yes I know you want to work out what you are paying interest wise but just like gas and electric tariffs the banks jobs is to loan you money that you think is a good deal when its not so the best way is get quotes and see what it costs you in total and dont fall for the old trick of why pay £150a month for 3 years when you can pay £120 over 5 looks good until you see the final bill
 

jaymd

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The way most loans work is that they will simply add 1months interest to your settlement figure. This would work out a lot cheaper for you to pay it off,because if you just keep on paying your loan as normal you are paying interest on all that your owe for the rest of the term, so you are incurring interest for the remaining term.
 

oldtimer

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The way most loans work is that they will simply add 1months interest to your settlement figure. This would work out a lot cheaper for you to pay it off,because if you just keep on paying your loan as normal you are paying interest on all that your owe for the rest of the term, so you are incurring interest for the remaining term.
If its a personal loan or part of a set period then it makes no difference if you pay it of early as the bank will just get all their money earlier because thats the contract you sign I think the term is heads you lose and tails you lose
 
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axel132132

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Yeh, my mum worked it out and ive already paid all the interest on the loan what happened is i borrowed 7500 and my loan amount was 9000 ish.. So ive been paying it off and ive got a settlement figure of 4662 or what ever. So ive already paid about 4338

So what im trying to say is if i carry on paying the Direct Debit its irrelevant of interest or not as its already added to my figure

I think this is right

THen that way i will save 30 days interest by just paying the direct debits of?

Its a personal loan

Cheers
 

JASON

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Not sure if this has been mentioned as I haven't read all the replies, however if it's a loan where you can overpay on occasion do this is 2 chunks.

Eg if the loan is £4500, then pay off £4000, then in a couple of months, pay off the remainder.

They then only charge interest on what is owing on the final amount.


Sent from my iPhone using Tapatalk
 
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axel132132

Regular EF Member
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Ahhh thats a good idea if thats how it works cheers Jason ill give them a ring monday see what they say about how the interest works when paying off nice one ta
 

Paul.M

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Best to ask the experts on this matter:- Money Saving Expert: Credit Cards, Shopping, Bank Charges, Cheap Flights and more

Use their forum to get advice but I guess they will tell you that it will save you a whole lot more money if you pay the settlement figure now regardless of the £100 sign up bonus + interest on that savings account. Your APR % on the loan will be 2-5 times higher than the savings account APR %.
 
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