Avoiding Early Settlement Penalty

scarymcflary

Hello,

First post!!

I have a loan with RBS which is on 14.9% APR and have approximately £13000 outstanding on it. I phoned for a settlement figure as I have a lump sum coming next week which will pay half off it, and have a new loan with Nationwide at 6.4% for the balance (which I am delighted with!).

Anyway, the settlement figure was approx £13400, which I understand is due to 58 days interest being applied as the penalty.

I have read this suggestion on this forum, but it seems to good to be true! Can I pay half off next week when the funds come through from Nationwide, and then half less £400 the following week and then just let the monthly payment of £384 go out at the start of March and therefore dodge the penalty?

Is that actually allowed and would I avoid the extra £400 ish fee by doing this?

Thanks for your help in advance!

Scary McFlary

BoGoF

Only if you are allowed to make overpayments - check your agreement

CLAPTON

whether or not you can make overpayments depends upon the T&Cs of your loan; otherwise the principle will work

scarymcflary

I remember when I took the original loan out, I was advised that if I overpaid it would bring down the term of the loan, not the balance. Would that be ok?

Thanks!

CLAPTON

scarymcflary wrote: »

I remember when I took the original loan out, I was advised that if I overpaid it would bring down the term of the loan, not the balance. Would that be ok?

Thanks!

fortunately, you remember incorrectly as that actually make no sense

either read the T&Cs or phone them and ask if overpayments are allowed

scarymcflary

Made sense in my head!! I will give them a call, thanks!

scarymcflary

I know why it didn't make sense, because what I should have said was overpayments would reduce the term of the loan rather than the monthly payments. I stand corrected.

Off to phone the bank...