Explain early repayment on personal loans

Sarahkate548

Can ayone help. Ive applied for a personal loan via Moneysaving website. The loan is through Sainsburys. I cannot get a straight answer from Sainsburys when I ask. What happens when I pay of the loan early. I am trying to find out if the interest which is loaded upfront is deducted from the loan amount if I pay it off before the loan is due to end i.e do I only pay interest on the loan for the time I am using it, rather than the whole interest for the whoke term???

Mahsroh

You should pay less interest if you settle early.

I'm not an expert but that's how it's always worked with any loan I've had previously. I'm sure someone with far greater knowledge than me will give you a definitive answer though.

Gaz83

Interest isn't front-loaded.

You need to check your terms and conditions, but lenders are allowed to charge an early settlement fee of up to 58 days' worth of interest on early settlement of a loan.

You'll only be charged interest for the term you had the loan, not the whole term.

[Deleted User]

The interest isn't loaded upfront. It's charged on a daily basis, so early settlement saves you a lot in interest.

They can charge 2 months interest for the early settlement.

foxy-stoat

Its on the website

http://www.sainsburysbank.co.uk/loans/early-repayments.shtml

You wont get an exact figure as it will depend on your payment date, date you last paid and the date you ask for the settlement figure....you havent even taken the loan out.

The interest is not front loaded, its worked out on a monthly/daily basis. Outstanding balance, plus interest (say 10% divide 12). They say they charge upto 58 days interest for early settlement plus any fees.

aled247

Hello sorry I have a question.
Please see image of a page of my Sainsburys loan agreement, it looks like every month I pay around £1 less for interest and actually pay off more of the fee. Does that mean it has been front loaded?

http://tinypic.com/r/2mzws3n/9

Nearlyold

aled247 wrote: »

Hello sorry I have a question.
Please see image of a page of my Sainsburys loan agreement, it looks like every month I pay around £1 less for interest and actually pay off more of the fee. Does that mean it has been front loaded?

http://tinypic.com/r/2mzws3n/9

No in fact its a clear indication the interest is not front loaded, not that interest is ever front loaded on consumer loans anyway.

Pixie5740

aled247 wrote: »

Hello sorry I have a question.
Please see image of a page of my Sainsburys loan agreement, it looks like every month I pay around £1 less for interest and actually pay off more of the fee. Does that mean it has been front loaded?

http://tinypic.com/r/2mzws3n/9

No your interest has not been front loaded. Sainsbury's work out the total amount you would repay over the term of the loan (capital + interest) and divide by the number of repayments you will make over the term of the loan (for example a 5 year loan will have 60 repayments 5x12) to give you a fixed repayment amount each month. If you repay your loan early then you will shorten the term and therefore the amount of interest you pay.

http://www.sainsburysbank.co.uk/loans/early-repayments.shtml