Loan redemption

bethsmcdonald

Hi there

I'm in a position where I can pay off a loan I have with HSBC 18months early but the redemption figure I have been given is only £700 less than the outstanding amount. I've never done this before but I thought the redemption figure would be a lot less given the interest I would be saving. Any thoughts/advice much appreciated.

Caz3121

How much was the loan and how long have you been paying it for? Interest is calculated on the outstanding amount so the later in the duration, the less interest you will be paying
You can run an example through here http://www.theguardian.com/money/loan-repayment-calculator-interest-rates?view=classic
Also you need to check if there are any early repayment penalties

bethsmcdonald

Thanks for replying. The loan was for £25,000 and I've been paying it for three and a half years so it is nearing the end but I still thought there would be more than £700 difference. There is no early repayment penalty but I would miss out on £650 cash back at the end of the loan so I'm really not saving much by paying it off early it would seem….

Tixy

What was the APR? or the monthly repayment?

£700 doesn't look unreasonable actually.

Say the APR was 12% then the interest to be paid in the final 18months would be £891. Assuming they charge the standard 58days interest charge for settling early and that would be down to £713.

If your APR was a lot higher than 12% then I would double check the figures they have given you.

bethsmcdonald

The repayments were around £525 a month and I'd have to dig out the paperwork to check the APR… I'm sure they are right but I was just a bit disappointed! Not sure whether to pay it off now or just keep the money in another account/premium bonds seeing as I'm not going to gain much by paying it off early...