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Charge for overpaying Natwest loan
Hi, hoping someone can help as I'm slightly confused! I have a Natwest personal loan for £7500 which I opted to pay back over 36 months at 8.56%, £237.79 per month.
I got this very recently at the beginning of May, so the balance is now £7522.87 as the first bit of interest has gone on before the first payment comes out on the 1st July.
I'm in a position where I can pay off a chunk of the loan now (£2500) and then possibly a few hundred pounds more each month- but Natwest charge 2 months interest for every over payment you make. The next bit of interest due to be added is £51.16 on 29th June, so £102.32 will be charged for any overpayment at this point. Do the savvy people on this board know the threshold where I wouldn't be any better overpaying for the coming months? And also would it affect my credit rating for the worse if I did overpay? I've heard that can happen sometimes.
Many thanks for any help in advance.
lea_t88
I got this very recently at the beginning of May, so the balance is now £7522.87 as the first bit of interest has gone on before the first payment comes out on the 1st July.
I'm in a position where I can pay off a chunk of the loan now (£2500) and then possibly a few hundred pounds more each month- but Natwest charge 2 months interest for every over payment you make. The next bit of interest due to be added is £51.16 on 29th June, so £102.32 will be charged for any overpayment at this point. Do the savvy people on this board know the threshold where I wouldn't be any better overpaying for the coming months? And also would it affect my credit rating for the worse if I did overpay? I've heard that can happen sometimes.
Many thanks for any help in advance.
lea_t88
0
Comments
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Why not save the money in a high interest account and pay it off in full? The charge for overpaying the lot might work out cheaper than overpaying in bits if they're going to charge you 2 month's interest each time!Total 'Failed Business' Debt £29,043
Que sera, sera.0 -
The charge is probably 2 months interest for the amount you are paying off early (about £36), not 2 months interest of the full loan.
Any money you pay off now will save you approx 33 months of interest on that amount, so you don't need to worry about being close to any threshold this early on in the loan. The threshold will come when the outstanding balance is less than approx £500 plus the lump sum..
As for the affect on your credit rating - is your credit rating so critical that whatever minor affect it might have is worth the several hundred pounds that you would save in interest?loose does not rhyme with choose but lose does and is the word you meant to write.0 -
immoral_angeluk wrote: »Why not save the money in a high interest account and pay it off in full? The charge for overpaying the lot might work out cheaper than overpaying in bits if they're going to charge you 2 month's interest each time!
It would probably be after Christmas once I had saved the remaining balance to pay off in full, and by that time I would have paid more interest in this first six months while the interest:balance ratio is high. So thought it sensible to get a lump sum off now and save interest for the time being. The £2500 is currently in an ISA.0 -
The charge is probably 2 months interest for the amount you are paying off early (about £36), not 2 months interest of the full loan.
Any money you pay off now will save you approx 33 months of interest on that amount, so you don't need to worry about being close to any threshold this early on in the loan.
As for the affect on your credit rating - is your credit rating so critical that whatever minor affect it might have is worth the several hundred pounds that you would save in interest?
Thanks Redpete. I called Natwest yesterday to check if it was 2 months interest on the amount paid or the full balance and the chap I spoke to didn't really seem to know but advised it was probably 2 months of the whole balance- which is why I thought that may be quite high.0 -
Thanks Redpete. I called Natwest yesterday to check if it was 2 months interest on the amount paid or the full balance and the chap I spoke to didn't really seem to know but advised it was probably 2 months of the whole balance- which is why I thought that may be quite high.
what do the Ts & Cs say?loose does not rhyme with choose but lose does and is the word you meant to write.0 -
what do the Ts & Cs say?
"If you choose to repay the loan early, either in full or in part then an early repayment fee will be payable. The fee will be an amount equal to 58 days' interest at the Annual rate of interest, 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"
So this reads as you said Redpete- in that it's 2 months off the balance that I repay, not the full balance? It's my first loan so trying to work out the best option. In regards to my credit rating, I have a great record so don't want anything to impact on it too badly.0 -
"If you choose to repay the loan early, either in full or in part then an early repayment fee will be payable. The fee will be an amount equal to 58 days' interest at the Annual rate of interest, 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"
So this reads as you said Redpete- in that it's 2 months off the balance that I repay, not the full balance? It's my first loan so trying to work out the best option. In regards to my credit rating, I have a great record so don't want anything to impact on it too badly.
clearly you only pay the interest on the amount of overpayment
so pay as much as possible as early as possible0 -
I made the overpayment on 24th June, so very happy. The agent I spoke to asked if I would like the term of the repayment amount reduced and I asked for the monthly repayment amount to be reduced. I received a letter yesterday explaining my new payment schedule which has reduced the term instead of the monthly payment. Do you think they would change this if I called them?0
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