Paying off large sum on Personal Loan

kempsey

Hi,
I took out a Sainsbury's personal loan in July last year and am in a position to pay off a large portion of the loan which is outstanding thinking this would save me a lot of interest.


I am confused that when I spoke to Sainsbury's and explained that I wanted to pay off most of the loan which will leave about £1k owing, they said that if I did this then the part payment will come off the capital and interest set for the full term. in other words, my current outstanding balance is £6.4k but the £5k I want to pay will be deducted from the current figure plus interest which comes to £8,6k!!!


I would have thought that if I did this then the loan would be 'Restructured' and that I would be paying less interest for the remaining period?


Can anyone help?:o

Monkeyballs

Hi,

I'm not sure but I think it's because it's an overpayment on an agreed term contract - I think I would have thought the same as you though...

Paying a lump sum wouldn't be cause for it to be restructured but just bring the combined interest and capital balance down.

I think that you might be able to either negotiate on term of the contract or amount paid?

Personally I would either save an extra grand or so and repay all in one go or, take a second smaller loan to combine and pay off Sainsburys.

That is what I would do but I'm no expert, someone else will be along soon I should imagine

MB

CLAPTON

kempsey wrote: »

Hi,
I took out a Sainsbury's personal loan in July last year and am in a position to pay off a large portion of the loan which is outstanding thinking this would save me a lot of interest.


I am confused that when I spoke to Sainsbury's and explained that I wanted to pay off most of the loan which will leave about £1k owing, they said that if I did this then the part payment will come off the capital and interest set for the full term. in other words, my current outstanding balance is £6.4k but the £5k I want to pay will be deducted from the current figure plus interest which comes to £8,6k!!!


I would have thought that if I did this then the loan would be 'Restructured' and that I would be paying less interest for the remaining period?


Can anyone help?:o

yes, you will pay less interest as the overpayment will reduce the capital owing and hence you pay less interest : there may be a couple of month interest penalty .. what do the T&Cs say?

gb12345

I think you may have misunderstood what they were telling you.

The £5k will in the main come off the balance that you owe, but they are allowed to charge you up to 56 days interest on the amount you are repaying. So you'll be reducing your balance by £5k minus the interest amount.

Your interest will then be calculated daily on the balance outstanding, which will be your £1k. You'll still pay the same amount each month, but will clear the loan a lot quicker.