Thought I had got off to a good start!!

Ayeshalush

In comparison to some people I don't owe a huge amount. Last July I borrowed £9500 (Northern Rock/5 year/5.9%)to buy a new car.

I consider it to be manageable debt as I can comfortably make the payments each month - HOWEVER I am very aware of how this may change if my circumstances were to change i.e. redundancy, long term sickness, etc, which is why I want to clear it sooner rather than later.

Anyway, to get to the point - I was very pleased with myself for sending of a cheque for an overpayment of £400 last Thursday. I had checked that there were no penalties or charges for doing this.... what I didn't consider (until today!!) was that the overpayment would not reduce the total interest I was charged. When I phoned to check I was told that the total interest is added at the start of the loan and only adjusted if paying the whole amount early. The lady I spoke to was very pleasant and helpful and did say that it was possible too reschedule the loan if I had a fairly large sum ready to pay back (which isn't the case!!).

What I'm a bit annoyed at myself about is that the £400 I sent last week would have been better going into my savings account (where all future 'overpayments' will be going) where it could have earned some interest to offset the loan interest!

Anyway rant over!!:rolleyes: - on a positive note, at least I realised my error sooner rather than later.

Ali

tesuhoha

Wouldnt they refund it to you if you asked for it

CLAPTON

just read their T&Cs and FAQs ...very subtly worded ...wouldn't have assumed thats what they meant....well done in discovering so quickly.

piglet6

Yep, well done for discovering the loophole so quickly, Alicatt :T - it might have been worse...you might not have realised until you had paid off several thousand:o !!

Congratulations also for keeping on top of your debt and not allowing yourself to become complacent because you can meet your monthly payments:D - its fantastic that you are aware of the pitfalls (redundancy, etc) which might cause problems, and that you are taking precautions to avoid any future issues:cool: !!

Good luck with building up that savings account and paying off the debt early in one big lump sum!:j

Piglet

Ayeshalush

tesuhoha wrote:

Wouldnt they refund it to you if you asked for it

I didn't ask but the lady I spoke to said that it had already been applied to my account, so I would guess the answer would be no. At least it means that the loan will be paid off 2 months earlier than planned.

Ayeshalush

Thanks everyone for your replies and support. I was going to click the thanks buttons but I see they have disappeared again.

On another positive note, it will make me put the savings that I do have (only about £2k) towards my loan fund. I have been very reluctant to do this as I don't have a pension and this was my 'old age fund'! I stopped my monthly deposit to this account of £100 in March, planning to use it to contribute to the loan overpayment - but I was really struggling with taking the lump sum out of the account and paying it to Northern Rock - leaving me with no savings, pension or Emergency Fund!

I'm now going to pay every spare penny I can into my ISA each month until I reach the £3k annual limit, and then put the rest in my savings account. I know that once I have enough between the two accounts to clear the loan then I will use it all to do just this - hence it has all worked out to my benefit really!

... and as my ISA and savings account both have instant access, I also have an Emergency Fund. I won't be tempted to dip in for anything other than a real emergency though as I really don't like taking savings out of the bank (although if there's money in a current account - that's a different story!!:o ) - inherited this gene from my dad I think!;)

So, as a result....I only have to find another £5520.97 - less than I previously thought but still a fair bit.

lynzpower

Alicatt

Could you move your loan to another provider that allows overpayments?

Lynz
x

Ayeshalush

I did think about that, Lynz as I seem to recall somewhere loan rates of 5.6% mentioned.

...however, that means I probably won't use my savings!!:o I need some stern words in that area - I know I'm being silly but I just feel that I need that security of an 'Emergency Fund'.

...but now someone else has suggested changing my loan(and given me a virtual kick up the proverbial!) I will go and investigate!!

lynzpower

DO IT DO IT

There might be some number crunching to do, but my feeling is less interest is a good thing! LOL. I had a front loaded loan once ( thanks Lloydstsb for that one) and it still worked out better off out of it than in IYSWIM

lynzpower

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1099314935,42333,#uninsured

Ayeshalush

Thanks Lynz.

I've had a quick look but will spend more time later tonight as I have to go get dinner ready.

I'm thinking though that, unless I can get a cheaper APR, it would be better to stay with NR and pay the loan off early, but in one lump sum, say in 18-24 months (sooner if poss), as they do reduce the interest in these circumstances (will need to check by how much though - I'm sure there are details in my agreement) than in monthly overpayments. Just looking at the MSE info (will dig a bit deeper later though) cheapest flexible loan is 6.9%.

Will need to get my calculator and spreadsheets in gear!:rotfl: