If I pay 5k off a 9k loan...

CamelLady

:jI am about to pay 5k off my 9k loan, can i ask if the repayments will drop or just the term reduce?

Many thanks x

TonyMMM

You can ask ... Depends on what your loan agreement says about overpayments ... check the paperwork.

If they allow partial repayments like this, you may be offered a choice.

CamelLady

Thanks ...I'm going into the bank at lunchtime to pay the lump sum so fingers crossed they will let the monthly payments drop instead..

Typhoon2000

Yes depends on your loan, but for most repayments are fixed- so the term will be reduced.

CamelLady

I'll be paying off the balabce in october just wanted the loan payments chopped so to speak as the interst rate is 15.06%!!..

:eek:

paddyrg

It will be cheaper for you overall if the term is reduced as opposed to monthly payments reduced

CamelLady

oh, ok i just wanted more money in my pocket

CLAPTON

seems an odd thing to do
overpaying to reduce interest; reducing monthly payment to increase interest.


also if they won't reduce the amount make sure you still have enough money to continue paying the full amount (hold back some of that overpayment if necessary)

CamelLady

I'm overpayinge because i have just sold my car, then the end of the year I will have the remainder to clear the loan. I was just wondering what ther bank would let me do :-)

~Brock~

Make it clear to the bank that when the money is paid in you want it to be treated as a 'partial settlement' this will require them to calculate and apply a proportionate rebate of interest to the loan. If you don't do this they may instead just treat it as a 'pre-payment' which will not necessarily gain you any benefit in terms of the total amount payable.

It remains their own choice of how they then move forward i.e. whether they reduce the term or the payments, but this should be made clear in the terms and conditions, assuming the loan was taken out after February 2011.

CamelLady

LOan taken out June 2010 :-)