Early repayment advice

hj678

Hi, firstly I've had a quick search and look at the stickies but couldn't find anything, if i've missed it I apologise

I'm curious as to how early repayments work, have been looking at a small loan to consolidate some credit card debt

Now I only need about £3000, however looking around I was looking at 20-30percent apr.. however for a loan of around 7-8 It was less than 10percent

Making me think it would be more worthwhile to take the larger loan, and just pay half of it straight back.

I'm just not too certain on how interest is calculated on loans, I've been pre-approved by natwest for £7500 at 9.9% APR but want to check a few things before I sign the forms when they come through

How does interest work on a loan, is it calculated each month on what is remaining, or do you have to pay the total interest figure you were given plus the extra month they mention below?

Thanks in advance




"You have the right to repay the credit early at any time in full or partially.

If you chose to repay the Loan early, either in full or in part then additional interest will be payable. This will be an amount equal to 58 days interest at the Annual Rate of Interest (28 days’ interest only if the original period of the loan is one year or less), calculated on a daily basis on (a) the amount by which the outstanding balance of the Loan is reduced by the overpayment or (b) where the Loan is repaid early, on the amount of the outstanding balance of the Loan which is repaid ahead of the due date."

redpete

The interest is calculated at the beginning based on you making the monthly replayments as scheduled, this is how they work out the monthly repayments that will ensure the capital and interest is all paid at the end of the loan. Given the NatWest wording you quoted you can make early repayments and interest is only actually charged on the outstanding balance - hence their requirement to pay extra as a fee on these early repayments.

So if you pay some or all early you do not get charged interest as if you borrowed it for the full period.

hj678

That's brilliant, thanks very much

paddyrg

Although also look at ratesetter.com and zopa.com for peer-lending rates which are lower for prime lenders, and there are no early redemption fees per se.

hj678

paddyrg wrote: »

Although also look at ratesetter.com and zopa.com for peer-lending rates which are lower for prime lenders, and there are no early redemption fees per se.

Thanks I'll give them a look over now