Paying off a loan early settlement figure?????

diesel1978

Hi All
I hope i am posting in the correct area please forgive me if i am not.
A couple of years ago i got a loan with egg for £10,000 over 5 years the interest rate being 7.9%.......ad also no penalties for additional payments or paying off early. The loan ends september 2007 and i have been paying £201.16 every month since i got it.
I am now in a position to pay it off early. My current balance is approx £3464.00
I have just called to ask for an up to date settlement figure and have been quoted £3484.21.
I don't understand......i thought it would have been less because i am saving 18 months interest...am i wrong? And why would i owe an extra £20 on top for paying it of early?
please help x x x

DavidHM

September 2007 is eighteen months away. 18 x £201.16 = £3620.88.

If the balance is £3,464 then I guess they've applied the typical two months' interest to take it up to £3,484.21 but that balance is all capital and no interest is applied to the balance because there is no time to pay it over.

£3,484.21 is less than the amount you'd pay if you made the remaining 18 payments; however the £3,464 balance is not the amount of payments still to make but rather the amount of capital that hasn't been repaid yet.

diesel1978

ok a little bit of thought and i think i have worked it out now lol