Early repayment of loan

QueenMop

Hello,

I have a quick general question regarding the way loan repayments are calculated.

I am planning on borrowing £10,000 from a bank and will repay it over 7 years at 7% interest.

So each month I will be paying back £150.

Now, if someone lends me £5000 (and charges me no interest) and I use this this to make an early repayment off my loan, what will happen:

Will I now still be paying £150 per month, but for a shorter period of time

Or will I pay a smaller amount per month, but still for the 7 years?

I hope I have made this enquiry clear!

zppp

Depends on the loan provider, some will treat a partial repayment in reducing the term, others will reduce the payment. Some will give you the choice. Which provider is it, and we can find out.

QueenMop

Thanks for your quick response.
I haven't got the loan yet, it is hypothetical so I can decide on my best option.

darich

There may not be the facility for a large payment towards the loan without paying it off completely.

My loan permits maximum overpayments of £100 in any month, or I can pay it off completely.
Presumably if I wanted to do something in between there may be a charge but every loan and lender is different.

Best thing to do is ask the lender what the position would be.

CLAPTON

darich wrote: »

There may not be the facility for a large payment towards the loan without paying it off completely.

My loan permits maximum overpayments of £100 in any month, or I can pay it off completely.
Presumably if I wanted to do something in between there may be a charge but every loan and lender is different.

Best thing to do is ask the lender what the position would be.

since January 2011 all loans must allow early part payments and early full settlement

zppp

QueenMop wrote: »

Thanks for your quick response.
I haven't got the loan yet, it is hypothetical so I can decide on my best option.

Whatever you choose to do, read the SECCI documentation regarding partial early settlements, as it may state how the overpayment will be used. Otherwise, contact them and ask.

darich

CLAPTON wrote: »

since January 2011 all loans must allow early part payments and early full settlement

Wasn't aware of this.
My loan was started in 2008 so don't have the facility you mention.