How does 'Early Settlement' work?

newmoneyjedi

Hi, I was hoping some of you may be able to help me figure out how an early settlement on a loan would work?

What i'm confused about is, say I take out a loan of £8,000 at 9.9% APR with a repayment term of 60 months. My total repayment amount would be £10174.98.

What I want to know is if I were able to make an early settlement on the loan, say after 12 months for example, would I have to pay back £10174.98 or just the £8,000 plus the interest that has occured during the 12 months (keeping in mind that there is no early settlement fee).

If someone could clarify this for me it would be greatly appreciated.

CLAPTON

each month you pay the interest required plus a bit of capital
so after a year you will owe a bit less than the original loan of 8,000
so if you settled then you would have to repay the remaining capital plus a month or two interest as an early settlement penalty