Loan - Early Repayment

usermr3003

Hi,

I took out a loan in March 09 for £7000 with HSBC, 36 months, 4.785% flat rate.

I currently have 18 monthly instalments of £222.41 left (£4003.38) but I'm going away travelling in January and have the money to pay this off now.

I was planning to just leave the £4003.38 in my account as I believed it would cost more to pay it off early, is this correct? I read you get charged a couple of months interest but that doesn't make sense to me since they'll be getting the same amount sooner?

I'd rather pay it off before I go away so that the temptation is not there to dip in to it.

Thanks for your help

Apples2

You will get charged a couple of Months interest, but you will be saving whatever interest you are no longer going to pay over the next 18 Months.

usermr3003

Thanks for getting back to me so quickly. I rang HSBC and they said it would cost £3806.56 to settle, saving almost £200 which will go a long way when I'm in Asia! I read elsewhere if I part pay a big chunk of it leaving a small amount to be taken by direct debit I'd avoid the interest charge. Presuming this still works, do you know how much I should pay off? Should I leave 1 payment of £222.41 O/S or should I only leave a few pounds? They didn't tell me how much of that figure was the 60 days interest charge so I'm not sure what to pay/leave.

Thanks
Danny

Apples2

Personally, I would pay all but one Months repayment.

Don't go doing anything crazy like stopping the Direct Debit though. There may be a small interest adjustment to consider. Don't risk a default for the sake of a few quid.

woozywendy

I would check with your bank as I did not think they would let you leave any outstanding balance. You either carry on paying it monthly or pay it off in full and get a rebate on the interest saved.