Tesco Loan overpayments

dantheman2010

Hi all,

I am about 10 months into a 7 year loan with Tesco.

I want to get this loan done and dusted before the 7 years is up and I have decided that all being well in September I am going to start making overpayments.

My current payment per month is £350.00 and I will look to pay an extra £500 for the first couple of months and then down to about £400 per month extra. I have worked out that I could potentially pay it all off around the beginning of 2015 rather than august 2017.

I rang Tesco and they said the overpayments will not reduce the term of the loan only the amount I pay each month. But surely if I stick to over paying £400 per month in the next 3-4 years I will have cleared it off? If my payments reduced from £350 to say £150 in 3 years time then I would just increase my over payment to £600 to balance it and in effect still overpaying the same amount a month as at the beginning. Wouldnt then at some point the monthly payment reach zero?

I was confused by this so after thinking about it I rang them back and they said they had not had anyone do this before so have no training on it.

Am I missing something obvious or are they as he said just not trained on this.

If I owe £30000 inc interest and it takes 7 years to clear at £350 per month but every month I pay £750 inc the overpayment, no matter what they bring the payment down to if I adjust the overpayment to stick at £750 as a total then at some point before the end of the 7 years I will owe them no more money, surely?

Sorry for babbling on. Just wondered what you thought and if there is anything I should do such as keep a payment record each month to ensure my payments dont get lost in their calculations at some point and not taken into account.

Cheers all.

CLAPTON

have you read their website and your T&Cs about overpayments ?

http://metafaq.tescofinance.com/help/loans/add_payments

dantheman2010

I have but I dont get how the term can stay the same?

If I am paying £350 now + £400 over payments = £750 per month, if I divide that by the £25,000 I currently owe inc all interest is only 33 more payments.

Even if they reduce the amount I have to pay each time I make the over payment it makes no odds if I take the difference they reduce it by and add it to the £400 over payment it will still be £750.00 per month.

How can they say the term will still say the same as currently I have 72 months left, but as per the above I could clear the £25k in 33 months. If they just reduce the payment amount eventually I will be at £0.00.

Am I missing something?

This what their terms say in relation to the dates I have the loan;

Loan applications made from 11 June 2010 – 22 May 2011 (inclusive)
Yes, you can reduce the amount of your monthly repayments by making an additional part payment to your account.
If there are no arrears on your account, we will deduct the amount you pay from your outstanding balance, reducing your monthly repayments going forward. We will confirm your new monthly repayments in writing. The term of your loan will remain the same.


They have different terms for pre-my loan and post-my loan both of which have the option I want - to pay more and it reduce the term but for some reason not the period of time my loan was taken out. But surely still with over payments there is no way the loan can stay the same term?

arif50

I'm sure you got your answer - but wanted to post on here to help others who are in this situation.

I had the same situation when I wanted to overpay with Tesco finance. When I spoke to them they informed me there are two options. Either the overpayment can be used to reduce the length of the loan, or to reduce the amount of your monthly payment.

One very good thing about the Tesco loan is that there is no penalty for overpayment - and also they give you a written statement after each overpayment - that includes:

- Original Loan Amount (Including interest)
- Interest Rebate following Partial Repayment
- Total amount oustanding

These numbers will definitely make you feel good and encourage you to overpay in the future.

Lifes_Grand_Plan

Hi arif50,

I notice above you say there are no penalties for overpayment with Tesco (which ties in with what they say on their website) but their website also says "You will be charged up to two months interest if you choose to settle your Tesco Personal Loan early."

So surely by definition, if you are making overpayments (to reduce the term) then you will end up settling it early and will incur charges?

james3333

Lifes_Grand_Plan wrote: »

Hi arif50,

I notice above you say there are no penalties for overpayment with Tesco (which ties in with what they say on their website) but their website also says "You will be charged up to two months interest if you choose to settle your Tesco Personal Loan early."

So surely by definition, if you are making overpayments (to reduce the term) then you will end up settling it early and will incur charges?

MMMmmm .... did anyone get an answer to this? might be making overpayments on a tesco loan iam getting

ch3101

It depends when you took your loan out with Tesco.

If it was withing the last year or so then it is absolutely fine to overpay. You can EITHER reduce the monthly payment amount OR reduce the term of the loan.

You get an interest rebate for doing either but the rebate for reducing the term is higher so would be the best option.

Give Tesco a call and they will say exactly what I just did and they will give you an illustration of what difference would be made, how much you would save etc...

james3333

ch3101 wrote: »

It depends when you took your loan out with Tesco.

If it was withing the last year or so then it is absolutely fine to overpay. You can EITHER reduce the monthly payment amount OR reduce the term of the loan.

You get an interest rebate for doing either but the rebate for reducing the term is higher so would be the best option.

Give Tesco a call and they will say exactly what I just did and they will give you an illustration of what difference would be made, how much you would save etc...

brill thatnks, only just got it last week, so will do that!
PS i assume its a simple online transaction to over pay through the tesco online banking account?

ch3101

james3333 wrote: »

brill thatnks, only just got it last week, so will do that!
PS i assume its a simple online transaction to over pay through the tesco online banking account?

Yes I think you can do that but before doing so you'll need to notify them of what effect you want the payment to have.

So phone them once and just say that any overpayments you make will be to reduce the term then they'll apply them for that.

james3333

ch3101 wrote: »

Yes I think you can do that but before doing so you'll need to notify them of what effect you want the payment to have.

So phone them once and just say that any overpayments you make will be to reduce the term then they'll apply them for that.

cheers, awesome info!

copperjar

My loan was taken out prior to 2010. From the T&Cs it seems there would be no benefit to me making overpayments in terms of a reduction in the interest charged. Is that right? So I'd be better putting the additional payments into a savings account, then settling early and getting some interest back.

Loan applications made before 11 June 2010
Any additional payments made will be applied to your loan and may reduce the total number of monthly payments on your loan. However, there is no interest benefit to making an additional payment to your loan. This means that the amount of interest you pay on your loan will not reduce as a result of this payment.