Loan Closure

hufc2002

Hi all

5 years a go I took out a £12k loan over 60 months with Lloyds. There are only 2 month's remaining on my loan and the monthly payment is £246.09.

I requested an early settlement quote via internet banking and if I was to close it today it would cost my £417.35.

This seems very low to me considering there are still 2 months to run and my monthly payment is £246.09

Please can someone explain?

Cheers

No1Stoney

Because they are not going to add interest after today because you have paid it off. The monthly payments take into account that interest will be accrued every month

Clive_Woody

So rather than pay £492 you pay £417, not a bad saving considering that you are in the final 2 months of a 5 year loan. If you had paid it off a couple of years early then you would have seen a much bigger saving of interest but paying it off when you are practically at the end of the loan is never going to save much.

hufc2002

surely the interest isn't that much now that I am nearing the end of the loan?

The figure of £417.35 includes an early settlement rebate of just £3.63.

bigadaj

I'd agree that the interest would be low given it's the end of the term. Could it be that your current balance is actually less than two full months payment, and the final payment will only be for percentage of your normal payment as the loan is cleared by a lower amount.

This could be because your repayment dates are offset from the actual loan dates for example.

hufc2002

I am going to ring them to clarify. I'm guessing the final payment must be less than my normal monthly payment.

Monkeyballs

Hi, yup the final monthly payment is often less than a full months payment - my money would be on it being that

MB

hufc2002

I rang the bank and they confirmed that yes my final payment will be less than my normal monthly payment. Its going to be approximately £175.

Settling it now will save me about £3 so not going to bother.