paying 99% of loan to avoid early repayment fees?

A13EX_F

Hi all sorry if this has been mentioned before but a quick search didn't find anything.

I'm 1 year into a 5 year loan with tesco, with a redemption figure of £6523.36 I have the funds available to pay off the loan early but this would incur early repayment fees of £69.87 on top of this redemption figure.

does anyone know if it would be beneficial (and allowed) to re-pay £6458.12 (99%) and reduce the payments for the remainder of the loan effectively having 65.23 on a loan with them earning 7.1% apr paid off over the remaining 48 months and therefore avoiding the early repayment fees?

[Deleted User]

The remaining £65 would be paid off in your next monthly payment (assuming your monthly payment is more than that. It may leave you having paid too much and would need to organise a refund).

I don't think they would retructure the loan into smaller monthly payments. And not sure you would want them to?

BeenThroughItAll

A13EX_F wrote: »

Hi all sorry if this has been mentioned before but a quick search didn't find anything.

I'm 1 year into a 5 year loan with tesco, with a redemption figure of £6523.36 I have the funds available to pay off the loan early but this would incur early repayment fees of £69.87 on top of this redemption figure.

does anyone know if it would be beneficial (and allowed) to re-pay £6458.12 (99%) and reduce the payments for the remainder of the loan effectively having 65.23 on a loan with them earning 7.1% apr paid off over the remaining 48 months and therefore avoiding the early repayment fees?

Sounds like a lot of faff to avoid paying £69.87 ERC.

StuC75

You can make additional payments when you wish, the early repayment charge is just the 56 days (or so) interest that they charge on lump payments made,.. they then look for instruction on how you want that treating (reduce term or reduce payment)..

I paid a Tesco loan off last year for which the redemption figure included repayment fees, so quite unsure as to how you think that there would be another charge on top of that?

When I made lump payments, there would then be an interest rebate made to the account for the remainder which would be less the 56 days (or so) that they charge as early payment penalty...

I made 3 lump payments (3 times approx. £3k) to clear and the total repaid was about £5 out from the first redemption figure - meaning that no matter how you try and manipulate the system that's the lump sum & rebate amount needed to clear over a period of time..

ch3101

A13EX_F wrote: »

Hi all sorry if this has been mentioned before but a quick search didn't find anything.

I'm 1 year into a 5 year loan with tesco, with a redemption figure of £6523.36 I have the funds available to pay off the loan early but this would incur early repayment fees of £69.87 on top of this redemption figure.

does anyone know if it would be beneficial (and allowed) to re-pay £6458.12 (99%) and reduce the payments for the remainder of the loan effectively having 65.23 on a loan with them earning 7.1% apr paid off over the remaining 48 months and therefore avoiding the early repayment fees?

Due to the low age of your loan, you can over pay by as much as you want, up to the point where you still need to pay 2 months.

So you could call and pay 6300 and relieve the interest rebate on that. There is no fee for this.

You could THEN pay the loan off entirely, only paying 2 months' interest on 2-300 pounds. This will be effectively zero.

Hence you can avoid the 58 days worth of interest.

A13EX_F

thanks ch3101, you seem to have grasped what I was trying to achieve, i'll give it a try and leave 2 months worth of payments remaining, leaving £3 worth of interest to pay rather than £69.87 early exit fee.