Northern Rock unsecured loan - should I pay off part or not?

daveholiday

I have a Northern Rock loan and it is the most expensive element of my current debt. Therefore, following Martin's advice I would be best to pay it off before other debts.

However, I only have enough money to pay off a portion of the debt - which Northern Rock have said is ok.

Does it make financial sense to pay off a portion of this debt now, or does it mean that I am still going to end up paying the interest on the whole loan, therefore not saving any interest charges by paying it off early?

Apologies if this info is anywhere else on the site - I can't find it.

Many thanks to all answerers.

jay78

When did you take your loan out? Does rule 78 apply? Generally if you pay more it will take you a shorter amount of time to pay it off and there for less interest as interest is chared daily.

Phantom_Flan_Flinger

This is from NR -

Yes you can make overpayments at any time. Your monthly payment will not reduce and the total amount of interest paid will remain the same unless you settle your loan in full. As overpayments reduce your outstanding balance, you may be able to pay the loan off earlier than expected, as your loan term will reduce in line with any overpayments made. If you do pay off the loan early you may be entitled to a rebate of interest, which is calculated using the formulae prescribed by the Consumer Credit Act 1974

You may get a reduction in interest by paying it off early, but the only sure way is to settle.
Couldn't you just keep paying it until it's reduced enough to get a settltment figure?

samj_2

I We Have A Small Loan With Northern Rock And As Far As I Am Aware You Can Pay Off The Loan Early But You Still Have To Pay All The Interest Back To Them As Well.

daveholiday

Thanks guys.

The rule of 78 does not apply as the loan was taken out last year. I think I will wait until I can afford to pay it off in full and do that.

Cheers