How do you start to pay off a loan early?

WelshWoofer

Hi,
I know that this sounds like a daft question but now I have just about paid off all of my credit cards I would like to start thinking about paying off a loan from Lloyds TSB which currently has 3000 pounds left outstanding. The loan is not in arrears and is paid by direct debit monthly.
I don't have the full amount to pay off now but would like to start making some headway with it.
Do you put extra into a savings account and wait for it to mount up to an amount that will eventually pay off the loan OR do you try to make extra payments? (Not sure whether this is allowed)

As I now have the cards sorted I need to make an effort with this loan.

Any advice?

whatatwit

I think you would need to check the terms and conditions and how beneficial if at all, it would be to pay off the loan early.
You could put any extra into an interest bearing savings account, possibly an ISA, as these are tax free. But you can only have 1.

Well done on sorting the cards. :T

anniecave

Regards loan, it depends on the way the interest is calculated. For some loans I think it is all pre-calculated in terms of interest but I think there are often ways to get around this. I would get hold of the details (if you can make sense of them). You could also phone them up and ask what happens if you were to pay off extra, would the total amount you pay come down? Ask them if they can give you a quotation say on an increased monthly payment?

immoral_angeluk

We have a couple of loans and we've recently called them with a view to paying them off early. Both of them gave us a final settlement figure which was less that what we would've paid if we left it to run the whole term as the interest was calculated at the start.
I'd give your loan company a call and see what their policy is because I know some will charge you for ending a loan early whereas some others won't.

lynzpower

if its a lloyds classic loan, you can definately make overpayments, but I have a feeling the interest IS front loaded

dinkylou

Phone them up and ask them if the interest is front loaded and if not how much can you overpay per month (many of them have limits)

If the interest is calculated on a daily basis then you should make overpayments, if its front loaded then stick it in an ISA until you have enough for an early settlement.

Make sure you speak to someone on the phone who knows for definate.

Tondella

We overpaid our lloyds loan, the interest wasn't front loaded so it was worth it. They charge £150 if you pay it all off in a oner, but if you pay all but the final month's payments then you pay the loan off the following month but don't have to pay the fee! I know you're not in the position of doing this but it might help some others.