Overpayments per month or Paying in full early?

trev79

Hi everyone

I have a quick question if I may.

I have a loan that taken out on my Dad's account for debt consolidation (I couldn't get one, so my Dad got it and then I cleared my debt and I'm not repaying him as part of rebuilding myself financially and budgeting), with Sainsbury bank @ 8.1% interest. It's a two year loan and I'm paying £613 per month and I want to be able to pay it back early as I'm doing overtime etc.

Question is, is it better to make overpayments per month, or put the money aside to gather up a total to pay it off in full. I wasn't sure which way would garner less/more interest. They say in the contract that is you pay it back early you can get charged the amount of two weeks interest, but I wasn't sure that if I paid it off per month, the interest would work out more overpaying on a monthly basis.

Thanks in advance. I'm just finding my feet and I will be on here a lot more!

Cycrow

overpaying it will cost you less as you will be paying less interest.

The_Boss

Cycrow wrote: »

overpaying it will cost you less as you will be paying less interest.

My thoughts too based on experience. But reducing the term does save interest too.

Best that the OP calls and asks.

trev79

Thanks guys, but am I better to make overpayments on a monthly basis? Or better to put it to one side and pay off a large chunk?

ch3101

Yes, pay as early as possible.

The earlier you pay money off, the more you will save.

trev79

Oh ok, so better to chip away at it per month with overpayments. I wasn't if the interest would've worked out more that way but thank you everyone for your help!

JimmyTheWig

trev79 wrote: »

and I'm not repaying him

I presume you mean you are _now_ repaying him, rather than _not_!

Question is, is it better to make overpayments per month, or put the money aside to gather up a total to pay it off in full. I wasn't sure which way would garner less/more interest. They say in the contract that is you pay it back early you can get charged the amount of two weeks interest, but I wasn't sure that if I paid it off per month, the interest would work out more overpaying on a monthly basis.

It depends on the terms of the loan.
1. Are you allowed to make monthly overpayments?
2. What are the charges for a partial overpayment (is it 2 weeks interest on the amount overpaid)?
3. When is interest recalculated if you make a partial overpayment?