Can I get a loan that I can overpay on?

icw

Hi, Can someone with any experience of this kind of thing help me out here.

I want to get a loan for a new car. I have a good credit history so would expect to get a rate of about 6.2%

Can i get a loan that will allow me to over pay when ever I want or to pay the whole lot off if I have a good month without any penalties. Obviously I don't mind paying the agreed interest set out at the beginning.
Hope that makes sense?
thanks
ICW

icw

OK,
after doing a little research I can see that Northern Rock offer this

scorpio_biker

Hi,

I believe that Egg allows overpayments and I know that the Nationwide does.

HTH

Laurenbelle

Halifax allows overpayments too!

divadee

we have just gone for the northern rock loan for reasons the same as you that we can over pay at any time without penalty.

they say you can overpay or pay it off in full when you want, but it wont decrease your monthly payments only the length of the loan (obviously thats only when you overpay not pay it off!!)

MORPH3US

Hi guys, just a thought but if you don't gain anything by overpaying with Northern Rock (i.e. overpaying doesn't save you any interest - you still pay the same...) then if you can afford to pay more, why not just stick it in an ISA or savings, at least you earn interest that way...

Then, when you do have enough to pay it all off, pay it all off at once!!

M

jinkssick

thats well thought.

mrmajika

MORPH3US wrote: »

Hi guys, just a thought but if you don't gain anything by overpaying with Northern Rock (i.e. overpaying doesn't save you any interest - you still pay the same...) then if you can afford to pay more, why not just stick it in an ISA or savings, at least you earn interest that way...

Then, when you do have enough to pay it all off, pay it all off at once!!

M

You do gain from making overpayments. NR calculate interest daily and apply it to the loan account monthly. Any overpayments will come off the loan balance and therefore save interest. The direct debit comes out each month as normal and is not lowered by any overpayments. That is, overpayments go towards lowering the term of the loan and not the direct debit monthly payments.

It's only not worthwhile to make overpayments if the loan company use front loading of the interest. That is, all the interest is added to the loan on day one.

divadee

we have now got our paperwork for northern rock and about to send it off, but wanted to know just one thing!!

how do we overpay, can we just send them a cheque one month if we have a bit spare etc... Could we pay it into a branch or something? It says in the stuff they send you that you can overpay but doesnt tell you how :rolleyes:

MORPH3US

mrmajika wrote: »

You do gain from making overpayments. NR calculate interest daily and apply it to the loan account monthly. Any overpayments will come off the loan balance and therefore save interest. The direct debit comes out each month as normal and is not lowered by any overpayments. That is, overpayments go towards lowering the term of the loan and not the direct debit monthly payments.

It's only not worthwhile to make overpayments if the loan company use front loading of the interest. That is, all the interest is added to the loan on day one.

Thats incorrect (at least it is the way I read it)

"Yes you can make overpayments at any time. Your monthly payment will not reduce and the total amount of interest paid will remain the same unless you settle your loan in full. As overpayments reduce your outstanding balance, you may be able to pay the loan off earlier than expected, as your loan term will reduce in line with any overpayments made. If you do pay off the loan early you may be entitled to a rebate of interest, which is calculated using the formulae prescribed by the Consumer Credit Act 1974."

I.e. the overpayments won't save you any interest until the whole thing is paid off so as I said, you'd be better sticking it in an ISA and paying it off sooner and earning some money back...

M

panholio

Is the above correct? Is this not effectively front loading interest which I thought was now illegal?