Paying off car finance early

Monkeybrain

Hi, wondered if you guys could give me some advice please.

I purchased a car on 4 year finance agreement with Santander - it was done through car dealership so wasn't a personal loan. My question is whether I would save any of the interest if I paid the loan off early for example, the loan was for £15,000 and including interest it is £18,000. If I paid off early would I still have to pay the 3k interest or would this be reduced ?

I know that I would need to contact company for settlement figure but just wasn't sure whether a car finance loan was treated differently.

Many thanks for any help

stqueen

Hi Monkeybrain,

I also had a 4 year finance agreement with Santander and paid it off early.

Do you currently pay monthly? Everytime you make a monthly payment, your balance is going down. If you call Santander, they will give you a settlement figure that is lower than the actual amount you owe (so £18,000). I assume from this that the interest is therefore reduced if you settle early.

Monkeybrain

Hi stqueen, thanks for the response.

Yes I have a monthly DD set up at the moment which I am comfortable to continue. My question really was whether on a car finance loan the interest is fixed regardless of how early you pay it off - if thats the case then I can simply continue with my monthly payments but if its not and I could save some money on the interest then I would seriously reconsider paying it off.

Actually this leads me to a second question, would I have to pay it off in full or could I simply increase my monthly payments and reduce the overall term from say 4 to 2 years.

Hope this is making sense!!
thanks

stqueen

I'm by no means an expert, but if you called Santander tomorrow to get a settlement figure and settle the loan, you would be saving money on interest. Certainly for me, the settlement figure was lower than the 'balance'.

Regarding increasing monthly payments, I'm not sure if that is possible, it wasnt an option I explored with them. I would say give them a call and check it out!

Debs0778

The quicker you pay in full the less you'll pay overall in interest - ring them for a settlement and query whether you can increase payments to pay off quicker.

One thing though, just because the finance was arranged by a car dealer doesnt mean its not a personal loan - check your agreement

CLAPTON

what does your agreement say HP or fixed term loan
what does it say about early settlement

Monkeybrain

Thanks for the replies.
The contract doesn't state whether HP or not (or
Perhaps I'm not looking in the right place!). It does say finance agreement?

It states that I can pay it off early and as an example suggests if I borrowed £100 and after a quarter of the term chose to settle then I would need to pay £81.77.

It also states that interest charges are calculated at the outset of the agreement - does this mean it's fixed?

Thanks again

CLAPTON

Monkeybrain wrote: »

Thanks for the replies.
The contract doesn't state whether HP or not (or
Perhaps I'm not looking in the right place!). It does say finance agreement?

It states that I can pay it off early and as an example suggests if I borrowed £100 and after a quarter of the term chose to settle then I would need to pay £81.77.

It also states that interest charges are calculated at the outset of the agreement - does this mean it's fixed?

Thanks again

It looks like a standard loan agreement with standard early repayment terms
so yes you would pay less interest

ask them for a quote for early settlement