Overpaying Limits?

Freddie_85

Is there a limit to the number of times you can make an overpayment on a personal, unsecured loan within a given period? I would like to regularly overpay without having to pay a final settlement fee. Can you make more than one payment per month?

If for example, I had a loan of £5,000, to be paid off in 12 months with monthly payments of £435 per month, but instead I planned to pay it off in 5-6 months, could I simply request each month to pay approximately £1,000? I would like to reach a point where only a very small amount remains.

Would this method significantly reduce the amount of interest I would subsequently be charged in the remaining months?

And, if a very small amount did remain (less than a single month's instalment) would the loan be settled immediately, before the agreed loan period, without incurring any fees?

DCFC79

Might well vary from 1 lender to another but its a question to ask the lender.

JuicyJesus

It entirely depends on the lender. Some don't allow overpayments at all.

JSR

Under EU law all recent personal loans must allow penalty free overpayments. There are some odd cases where the lender can make a charge but they don't kick in until you've overpaid by more than £8,000 in a 12 month period.

The answer to your two questions are yes and probably. Lenders have the option to reduce your monthly payment rather than reduce the term but either way you won't incur an early settlement charge as long as the loan is cleared by your normal monthly payment.

Freddie_85

That's what I thought, as long as I let them know prior to making an overpayment, they have to allow it, under EU law. Not sure if there are any caveats to this though.

The first few repayments would incur the largest amount of interest paid, so the sooner I can make a significant dent in the remaining balance, the better. I would like to pay several months worth in one go, ideally in the first month.