help need advice about paying off bank loans

davidhuzero

hi, i am thinking of paying my bank loan with nat west, i was thinking of getting a balance transfer to pay it, so i rang the bank and asked how much i would need to pay if i paid it off in one go, i pay around £190 a month and there is around £4300.00 still to pay, i was thinking that if i paid now i would not have to pay the intrest on the remainder of the balance, but they said i still have to pay the intrest in full and also 58 days intrest for paying early. is this correct?

advice would be great:T

[Deleted User]

they should charge you the outstanding balance plus 58 days interest,have you misunderstood them,perhaps ask for a written settlement figure?that would be valid for 28 days

davidhuzero

Didn't misunderstand them. I questioned that I didn't think I had to pay the interest on the remainder and she said that I did. Also if I find out that I don't and continue to work on paying a balance transfer on final amount do you know of any credit cards other than mbna and barclaycard that will do a balance transfer to a bank loan with 18 months or more interest free

[Deleted User]

not sure that any do a BT to a bank loan tbh

Paul_the_Painter

Hi David, I think you are misunderstanding something about your loan, and how they state the balance.

The interest is calculated every month* and added to your outstanding balance, then your payment that month is deducted. This leave you with a new outstanding balance. If you want to repay the loan early, you oonly pay 58 days interest, not the interest your would have been charged until the end of the loan.

Example (avoiding APR issues!)

Say you are paying 24% interest - so 2% per month repayment £5/month

jan £100
feb £102 - £5 = £97
mar £98.94 - £5 = £93.94
apr £95.91 - £5 = £90.91
may £92.83 - £5 = £87.83
june £89.59 - £5 = £84.59
july £86.26 - £5 = £81.26
aug £82.91 - £5 = £77.91
sep £79.46 - £5 = £74.46
oct £75.96 - £5 = £70.96
nov £72.37 - £5 = £67.37
dec £68.32 - £5 = £63.32
jan £65.00 - £5 = £60.

so after 12 months you have paid £60 in payments and still have outstanding £60 - so if you had let the loan run for that year you would have paid/owe a total of £120

If however you had decided in Jan to pay off the loan and with a penalty of 58 days interest (say 2 months for simplicity!)

you would have paid £100 plus 2% twice - so a little over £104. assuming a balance transfer fee of another 3% (typical fee) you would have a debt of £107.16 on your card.

If you make those same 12 x £5 payments, your total debt will be

£107.16 - £60 (payments) = £47.16

So by paying the "penalty" of 58 days interest you end up batter off by £13 for every £100 you have outstanding on your loan account.

Assuming interst rate is as described and you keep up your payments to the card.

So it is probably worth doing.

Feel free to post up the interest rate you are being charged and the offer you are gettting from your credit card company etc, and I'll be happy to work it out for you for your circumstances.