Loan - early settlement advice

akaplatini

I'm looking for a second (and third,...) opinion on my loan settlement figure from people good with this sort of thing

the loan was for 12,500 for 60 months from RBS at an APR of 8.9%
I have paid at a monthly rate of 256.66 for 39 months and now want to settle early. 58 days interest is charged for early settlement.

I was quoted £5300 to pay the loan off.

That sounded quite a lot to me - as essentially I have paid for virtually 2/3rds of the time. I thought that I would paying approximately:
1/3*12,500=£4166+56 days interest.

I am sure that it is not that simple though - can anyone explain the quoted figure?

opinions4u

Because you owe more at the start of the loan, the interest early on is higher. So your monthly payments early on will be more interest and less capital.

Month by month the amount of interest will drop slightly, and the amount of capital repaid will increase slightly.

Without doing a thorough calculation, the settlement figure you've been quoted looks about right.

akaplatini

thought there would be a reason, thanks for your explanation