Cut loan repayments

deanoc73

Hello,


I am new to this site so please bare with me.


I have a personal loan with the current outstanding balance including interest stands at around £4500, I am looking to buy a house within the next 6 months so ideally I would like to pay and close out my loan before that time. I have contacted my loan provider who have stated that the loan interest generates on a daily basis. Now my question is if any body can help me because I want to make over payments and pay my loan off asap, im think of paying £1000 per month until its paid off so seeing as the interest is generated daily would I be better splitting that £1000 im aiming to pay per month into daily payments instead of monthly as my thinking behind this will be if I pay £35 per day ( 35 X 28 = 1000 ish ) then surely the interest will be minimised? I could be well off the mark with this one but it got my thinking.


Any help or advise would be greatly appreciated


Thank you in advance


Dean

pmartin86

Don't split, pay as muich as you have spare as soon as you have it avilable to save most interest, someone smarter/with more patience to detail, will be along with detail shortly no doubt, but just pay as much as possible as soon as possible for the biggest saving

Arleen

You may want to ring the loan provider again and ask. Because while it's accrued daily, I doubt that they run daily accounts on all the balances anyway, so the actual difference may be minimal if any.

And the best advice is to cut spendings even further (if possible) and throw every penny at the loan. That will make the biggest change in interest.

MEM62

If you are planning on buying a house within 6 months I assume that you will have a house deposit sitting in your bank. (Which will be earning you virtually nothing) You will save the greatest amount of interest by using part of this to settle the loan in total and then using the additional monthly amounts you were going to pay towards the loan to repay your savings.

Money_Rollercoaster

It's important that if you wish to overpay on a loan, you need to talking to the provider and make it clear you are making overpayments, not advance payments (on future months). If you don't do this, you won't save the interest you've got your eye on saving.


Here's an example from sainsburysbank ...

Sainsburys_Bank wrote:

Why make an overpayment?

• Making overpayments will reduce the loan term so you’ll pay it back faster.
• You could also be entitled to a reduction in the total amount of interest owed.

How is the reduction in interest calculated?

You only pay interest on the outstanding balance of any loan so, if you pay back more than you originally agreed each month and pay the loan back earlier than expected, we can recalculate the total amount of interest you’ll pay.
In order to do this you need to let us know in advance that you’d like to start making overpayments.

An alternative strategy, which I've used before, is to save in parallel and get a settlement figure from the loan provider when you think your savings will cover the outstanding balance. Although you do forfeit some interest saving, if you settle early, it will still save you part of the interest you were expected to pay.