Moving Loans or repaying early? save yourself some money...

randomnut

Just wanted to share with you a trick to save yourself some money if you are moving/refinancing loans or just paying one off early. I've done this so can confirm it works. It may seem like obvious common sense to some but the banks won't be upfront that you can do it to save a few quid.

I had a loan with Barclays, and found I could get a cheaper interest rate with nationwide. I got a settlement figure which included the outstanding amount plus about 50odd days (I think) interest. I then thought to check about making overpayments, and was told all loans taken out over the last few years can make penalty-free overpayments.

So I took out the new loan with nationwide, made an overpayment of the loan amount minus a tenner, and then on my next payment the last tenner was taken and the loan paid off. Loan was then refinanced to a lower APR with no interest or penalty to pay Barclays for completing it early as otherwise would be necessary.

Like I said may be obvious to some but if you are going to refinance the loan elsewhere or otherwise pay it off early, make an overpayment, don't accept a settlement figure. Saved me quite a few quid.

Hope this helps someone anyway.

bigadaj

Useful advice and good point. The main drawback I can see is that you have the headroom to have both loans on your credit report at the same time til the first has been repaid, most people here seem to be at or above half their income on loans, cards etc and so couldn't get the second loan in place.

randomnut

That is a possibility yes, so I agree it is useful only if you can get the second loan approved in the first place.

I think they are a bit more lenient if you specify on the application that you are paying off a loan with the loan you are taking out though? I could be wrong on that.