Front-loaded interest

Onwards_and_upwards

Hi, we have a £25K loan from Tesco which has, I believe, front-loaded interest (our online balances started at £30k and we are now at around the £26K mark).

We are now in the position to make overpayments and I'm just wondering whether this will reduce the amount of interest we will pay overall, or whether we will have to pay a total of £30k regardless?

Many thanks.

[Deleted User]

It doesn't have front loaded interest.

Any early settlement will reduce the amount of interest you pay.

Onwards_and_upwards

Ok, thanks. I obviously don't understand what front-loaded interest is then! Thanks again.

Caz3121

Onwards_and_upwards wrote: »

I obviously don't understand what front-loaded interest is then! .

have a google for "guardian loan calculator" put in your loan amount, APR and duration and you should see a useful table that shows what is still outstanding at different points
The £30k you are seeing will be the total of all the remaining payments if you were to continue paying as per the original plan, paying it off sooner will result in less interest being paid

jonesMUFCforever

Onwards_and_upwards wrote: »

Ok, thanks. I obviously don't understand what front-loaded interest is then! Thanks again.

That would be in the bad old days when if you borrowed say £30k then the interest that you would pay for the duration of the loan would be added at the start so your opening balance might be nearer 40k.
These days most add interest daily and pass it monthly.
But as others have said any overpayments (if allowed check!) will reduce the total amount of interest you will pay overall - this will shorten the length of the loan.

bazzyb

jonesMUFCforever wrote: »

any overpayments (if allowed check!)

From the figures posted, the agreement was almost certainly taken out since 2011, so overpayments will therefore be allowed.

Onwards_and_upwards

Thanks all, very helpful. Yes, the loan was just taken out at the end of last year and overpayments are allowed.

zippygeorgeandben

I overpay my Tesco loan which is £222.61 @ 4.0 and when I pay an extra amount of £222.61 in one month, they also take off another £20 or so off the amount owing.