Sainsbury's Bank loan early repayment

AHAR

Hi,
I have eight repayments remaining on my Sainsbury's Bank loan totalling £1111.28. I called them to find out the cost to settle it now since they say on the website:
"Yes, you can settle your loan agreement at any time by writing to us and paying the amount you owe under the loan, which may be reduced by a rebate."

The figure they gave me was £1099.63. I was expecting it to be more than £11.65 less than the remaining monthly payments. The statement they sent recently showed my October and November payments included £7.40 and £6.74 interest. The loan rate is 6.2% so I figured since I'm earning much less than that in interest on the amount I have available to pay it off, I'd save money in the long run by paying it all off now. After doing a few sums it appears I'd be worse off repaying it early.
Does anyone know how they calculate this rebate? They don't mention any early repayment fees.
Thanks

enjoyincubus

I believe Sainsburys charge 2 months interest for settling early, but you will need to check your credit agreement to clarify that one

CLAPTON

on a 1000 loan at 6.2% over 8 months the total interest payable is only about £23... so there's not much interest to save really is there?
so substracting one or two months interest for early setlement, would leave about £11.

AHAR

Thanks.
I looked at the credit agreement and it shows the costs to settle after a quarter, half, and three-quarters of the term of the agreement but doesn't explain how it's calculated.
I guess the early repayments contain more interest than these last few. I'll just hold on to my savings.

enjoyincubus

AHAR wrote: »

Thanks.
I looked at the credit agreement and it shows the costs to settle after a quarter, half, and three-quarters of the term of the agreement but doesn't explain how it's calculated.
I guess the early repayments contain more interest than these last few. I'll just hold on to my savings.

Yes that will be true, as the interest is charged on a daily rate based on the balance at the end of each day. So if the original loan was for £5,000 on day 1 you would be charged interest on the full balance, fast forward a few years and the balance is down to just £1,000 with you being charged interest on this amount only.

As the loan has a relatively short time left to run and is for a low amount you don't appear to be getting much saving on interest payments (hence the small difference between early settlement figure and total remaining payments). So if you have the cash spare its totally upto you what you want to do. I would probably just pay it off so I don't have to worry about the debt anymore.