Partial early settlements Vs Balance payments

bhindi · 1 December 2017 at 9:13PM

Hi, I am helping someone pay their Ford Credit finance early, however none of us understand the best way to do it.

It is a Hire Purchase. Total amount of credit £6300. Duration 48 months. APR 12.7% (40 payments remaining) --Total payable £8090. Balance outstanding at 22/11/17 - £6004.85

Monthly payments are approximately £166. Last month we paid an additional payment, which I think went down as an 'Partial early settlement', We are now in the position to pay at least £800 a month additional to the regular monthly payment.

We hope to pay this off within 6 months. Someone has suggested we save the money in an unrelated account, and then go with the savings and settle the account with the lump sum, but I find that hard to believe that that is the best approach. Last month we made an extra £450 payment which benefitted the account with a £196 interest reduction. When we make our monthly overpayments, should we:

A/ Ask them to take it as a partial early settlement.
B/ Ask them to allocate it towards the balance.
C/ Save the money elsewhere and when have the settlement value covered pay it.

Many thanks, if someone has the time to read and comment.

Nearlyold · 2 December 2017 at 10:26AM

A/ Ask them to take it as a partial early settlement.
B/ Ask them to allocate it towards the balance.
C/ Save the money elsewhere and when have the settlement value covered pay it.

A & B are the same thing, not clear what you think the difference is.

At 12.7% you will be getting nothing like that on your savings, so the sooner you pay parts or all of the loan off the better.

Have you asked the lender if they charge the allowed 58 days interest on partial settlements?

bhindi · 2 December 2017 at 12:00PM

Thank you for the reply Nearlyold,

We were given the options of paying either A or B as though there was an advantage over one or the other, (it was implied that there was though the Ford employee was not at liberty to say which option was better)

As for the allowed 58 days interest on partial settlements, could you possibly explain further what this is about please, It is not something we know anything about. The staff we have experienced at Ford credit have been a very mixed bag, one was particular stunted in clarifying any of our questions. The other was marginally better but didn't reveal anything beyond necessary.

Thank you for confirming though that it is far obviously better to pay down the loan directly month on month.

Regards

molerat · 2 December 2017 at 12:08PM

If you make additional payments outside of the usual contracted ones they can, if the terms of the agreement allow, charge you 58 days interest on that amount to partially compensate them for the loss of interest they would receive if it was left for the contractual term.

You need to read the agreement and no doubt the meaning of your options A & B will crop up whilst doing so.

bhindi · 2 December 2017 at 12:11PM

Thank you for your reply molerat....

Charge 58 days interest on which amount?

I guess if they do there is not a lot we can do. we want to be rid of the debt as quickly as possible so if we are obligated to pay something that was agreed we just have to grit our teeth I guess.

molerat · 2 December 2017 at 12:16PM

The amount of extra payment.

Partial early settlements Vs Balance payments

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free