Interest outstanding when ending early

djwood1

Hi,

Bit of advice on a loan my other half took out really, can't confirm with the Credit Union until tomorrow but thought I'd ask here.

So, £5000 loan taken out with CU at 10.4% over 60 months so £105.99 p/m with a total interest of £1359.35 = £6359.35 total repayable.

She's 20 months into the agreement and wants to end early (40 months still remaining).

Total amount still outstanding (40months) is £4239.60 whilst the interest on this is £880

T&C state.....
"The borrower has the right to settle the Agreement early at any time by paying in full the balance of the Loan and any unpaid interest outstanding. "

Will she pay interest on the remaining 40 months or will the settlement figure be £4239.60 less £880 interest?

Thanks

James

jonesMUFCforever

It depends.
If the interest is calculated daily and debited monthly to the loan the CU will work out a repayment figure for her.

You pay more interest at the beginning of a loan than you do at the end.

nardocott

I just had a look at what it usually is and for credit unions the interest is usually calculated daily so you should be repaying the remaining capital plus the last months interest (assuming you aren't in arrears).

As jones says you pay more interest at the beginning of the loan so best to ask them what is the remaining amount (if you fancy working it out yourself try the PMT function in excel).

If they give you a repayment figure of the total remaining amount including the interest ask about making an overpayment of all but one payment and they should give you an interest refund - this is what people do to repay bank loans to save on interest.