Paying off a loan in one lump sum?

MMGG

Can I pay off the outstanding balance on a personal unsecured bank loan in one go to get rid of it once and for all rather than carry on with the endless monthly payments for the next 5 years??
Or can the bank demand that I stick to a monthly repaymant plan?

MoneyMiser

MMGG wrote: »

Can I pay off the outstanding balance on a personal unsecured bank loan in one go to get rid of it once and for all rather than carry on with the endless monthly payments for the next 5 years??
Or can the bank demand that I stick to a monthly repaymant plan?

Yes you can pay it off early. Give them a call and ask what the settlement figure will be to completely clear the loan.

MM

chris_m

It will depend on the particular bank but you should be able to. I've done it before with Natwest with no hassle.
You'll need to ask them for a final settlement figure because it will not (or should not) simply be the sum of the remaining payments. The total interest should be less than if the loan went to full term but how much of what you've paid so far was capital and how much was interest will depend on the particular formula they use.

stator

Yes I believe by law they have to allow you to repay it early, but you may not save as much money as you would think/hope. Phone them up and ask them to send you a settlement quote in the post, then compare this to the total remaining repayments and see how much you would save. Then compare that to how much interest you would earn if you put your money in a bank account instead of using it to pay off the loan. Also consider whether it's possible you could pay off the loan and then a few months later something bad happens like you need a new car again. If you had to borrow the money AGAIN that would be the worst situation.

savit4l8er

Of course you can pay if off. There will be some form of interest penalty. eg. 2 months interest and that may vary depending on how far into the loan you are. You may find you have paid a higher proportion of interest in the early stages. Your original documents should have details and you will have been sent a copy for yourself to keep.