Repaying a loan early

jen_79

I took out a loan just over a month and a half ago for some home improvements that won't go ahead, so I'm outside the cancellation window. I won't need the money in the near future.

The loan is £4000 over 24 months with an interest rate of 18.9%. The terms and conditions state:

6.1 You may repay the whole Loan early or make overpayments at any time. Overpayments cannot be redrawn. In each case, in order to compensate us for our reduced earnings under this agreement you will be required to pay us additional interest. The amount of interest will be equal to 58 days' interest at the rate applicable to your Loan or 28 days' interest if the Loan Term is one year or less. If there are less than 58 days (or 28 days where applicable) remaining of the original Loan Term, the calculation will be based on the actual number of days remaining. Interest will be calculated on (a) in the case of an overpayment, the amount by which the outstanding balance of the Loan is reduced or (b) where the Loan is repaid in full, on the amount of the Loan which is repaid ahead of the due date. Where you make an overpayment, the additional interest will be paid from the overpayment.

After reading this thread, I thought maybe the best way to repay the loan, instead of asking for a settlement figure, would be to repay the bulk of it, leaving just enough for the next DD payment to clear it. However I think the T&C's above suggest that an overpayment will attract the same 58 days worth of interest charge that a payment in full would attract?

Am I reading this correctly or am I being silly?! Also, how do you calculate 58 days interest, would this be correct:

£4000*(18.9/100)*(58/365)