Personal loan with overpayment option

ItsyBitsySpider

Hi All,

To fund some deficit in the stamp duty for my house purchase, I am exploring the option of using personal loan. Are there any personal loan providers who offer the option of overpayment.

I believe HSBC does so but overpayment simply reduces the duration of the loan and not the interest rate. I am interested to know if there is some loan provider where the overpayment would reduce the interest also.

I would highly appreciate any helpful responses.
Many thanks

Apples2

Why would anyone offer such a thing?

ItsyBitsySpider

Apples2 wrote: »

Why would anyone offer such a thing?

You tell me why not?

I find Zopa does something similar. They do charge their fee at the outset so there is a fixed overhead there.

steve4mandy

I am currently overpaying my Tesco personal loan, I have the option to reduce the term, they re-calculate the final payment there and then. I have to stipulate off term, or else they reduce monthly payments to end of loan. I called them last night to enquire how many overpayment constitute an early settlement, and was told I as long as I don't ask for an early settlement I wont incur the two month interest charge.

ch3101

steve4mandy wrote: »

I am currently overpaying my Tesco personal loan, I have the option to reduce the term, they re-calculate the final payment there and then. I have to stipulate off term, or else they reduce monthly payments to end of loan. I called them last night to enquire how many overpayment constitute an early settlement, and was told I as long as I don't ask for an early settlement I wont incur the two month interest charge.

Tesco won't lend money to cover stamp duty or really anything to do with buying property

ItsyBitsySpider

Do you have to always specify the purpose of the loan. Please pardon my ignorance I never took a loan before. Why is the reason of a personal unsecured loan important for a lender?

CLAPTON

ItsyBitsySpider wrote: »

Hi All,

To fund some deficit in the stamp duty for my house purchase, I am exploring the option of using personal loan. Are there any personal loan providers who offer the option of overpayment.

I believe HSBC does so but overpayment simply reduces the duration of the loan and not the interest rate. I am interested to know if there is some loan provider where the overpayment would reduce the interest also.

I would highly appreciate any helpful responses.
Many thanks

all personal loans allow you to make over payments or terminate the loan early

this will have the effect of reducing the interest you would otherwise have paid although it won't affect the interest rate (APR) of the loan.

ch3101

ItsyBitsySpider wrote: »

Do you have to always specify the purpose of the loan. Please pardon my ignorance I never took a loan before. Why is the reason of a personal unsecured loan important for a lender?

Yes, always.

Most of the time it is to ensure that the loan is for an accepted purpose, but some purposes may seem riskier than others.

For example a loan to pay off credit cards would deem the person a high risk as they have racked up debt already, what of they do it again?

Where as a loan for home improvements should be a lower risk as the person will most likely have some equity in their home for a worst case scenario charging order, and the value of the property may go up as well.

bigadaj

There might be a fundamental problem with this as you woud be expected to have the money for fees available. Borrowing this money is effectively just reducing your deposit, and so increasing risk for the mortgage lender, this could lead to a mortgage being withdrawn.

On the wider point of interest and loan duration then they are sort of the same thing, so long as your regular payments stay the same, the quicker you pay back then the less interest is charged, and the quicker the loan is paid off.