Paying off a loan early

rdchick

Hello!

Just a quick question as I am not 100% sure what happens when you pay off a loan early.

I took a loan out with Halifax in July 2010, had 3 month thing where you don't pay anything off for 3 months a the beginning, the loan was for £3500, and if I let it run its course it will be November 2018 it will be paid off :eek: but have budgeted so at the end of the year I will be able to pay it off in full (saving each month and then paying it off in one go as I don't think you can pay it off in chunks) I have gone with the current balance of £3321 which it says on my online banking.

I rang a few months ago about something else and they told me the balance which was much less than what it was saying on the online banking thingy if I paid it off then.

Does anyone know how to work out how much roughly I will actually have to pay back?

I think the APR is 29.9% (what a numpty for taking it out in the first place!) and I pay £96.04 a month which knocks something crazy like £18 off the balance :eek:

Any help would be lovely xxx

maidincornwall

one thing you need to check is if you have an early redemption clause, where if you pay it off early they will charge you a certain amount for doing this, eg I had a £10,000 loan for 6 months paid it all off except one months payment and that saved me £80 of interest that I would have had to pay if I had paid the whole thing off at once, ask at the bank, they dont like telling you about this but if you ask they will have to tell you the truth! I think its interest calculated on the balance remaining when you pay it all off so mine would have been ?% interest on £8,000 instead it was that % on £235. MIC

rdchick

Thanks Maid, thought I'd bite the bullet and ask them... Then get told that I have a 'legacy' loan so she couldn't help but if I rang again in the morning someone could

I hate banks and their little pockets of information...

rdchick

I rang again this morning.

I must be really thick as I don't understand how this loan works

I took out a loan in 2010 for £3500 to pay off my overdraft and credit card.

Today on my online banking it says I owe: £3321.49

I rang Halifax to find out how much it would be if I was to pay it all back by the end of the year, she said she could only give me a figure for the next 30 days and it would be £3494.10. so in theory I have only paid off £6 off of my loan since 2010, is that right?!

TonyMMM

I assume the first 3 months were treated as a payment break, but still incurring interest (clever trick that) so that will have added on about £260 at the start. Given the huge interest rate over a long period, the redemption figure seems about right, allowing for some sort of early repayment fee, did you ask what that was exactly ?

rdchick

They said it was 58 days interest does that seem right?

Loans are pretty horrible really aren't they?! xxx

blacksta

rdchick wrote: »

I rang again this morning.

I must be really thick as I don't understand how this loan works

I took out a loan in 2010 for £3500 to pay off my overdraft and credit card.

Today on my online banking it says I owe: £3321.49

I rang Halifax to find out how much it would be if I was to pay it all back by the end of the year, she said she could only give me a figure for the next 30 days and it would be £3494.10. so in theory I have only paid off £6 off of my loan since 2010, is that right?!

The £6 off the capital makes sense. It is called front loading . where more of the interest is added to the early stage of the loan and only when you reach three quarters of the loan will the capital payment be more than the interest payments. Any way you need to get out of that apr asap. Leaving it longer will make no difference as you would have paid all the interests at the early stage.

Apples2

Yes, 58 days is right

Yes, loans are horrible (and yes loans were horrible too)

Yes, the 3 Month break has hit you quite hard due to the lack of "interest holiday" for that 3 Months.

rdchick

Cool, thanks guys, lesson well and truly learnt! I was 21 when I took this loan out and pretty gullible! Hats off to the bank for getting me to sign up to it... what a numpty!!

I think I might juggle my finances around and pay this off before my overdraft as it's ruddy expensive. I plan to be completely debt free by March 2013 so I guess it probably won't make much difference if I swap them around... still can't believe how much interest is on it... where was Mrs Moneypenny from Superscrimpers that day?!

Thanks again guys (makes a difference from the usual payday messes huh?!) xxx

Peelerfart

Got to disagree with Apples(for once) and the OP, loans are fantastic things,it's paying the things back that's pretty horrible.

Though some on this board try their best to wriggle out of that particular requirement.

rdchick

Lol very true Peeler, I was pretty happy about getting it as it got me out of a pickle, more than happy to pay it off but had I really understood the amount of interest I probably wouldn't have taken it out! It will be all paid off by Christmas, 6 years early - yay! xxx