Can I avoid early repayment interest?

Laurenplatt

Hi everyone, looking for advice please. Currently awaiting sale of house and I want to pay off a personal loan with the funds from the sale. I know it is usually 56 days interest you have to pay but at 10.6% on a £17k loan this is quite a lot of pennies. Is there a way to avoid paying this? Can I pay off a lump sum but leave a couple of months still due and have the money in the account? Or is this wrong as I have told the bank lending me my new mortgage that I will pay off the loan in full and then take the hit of the 56 days interest? Any advice appreciated!

jonesMUFCforever

It will depend on the terms your lender agreed with you.
Some charge a fee on early repayments most don't but will charge if paying loan off early.
Firstly check whether you can make overpayments free of charge.
If you can check balance of loan and pay it off minus a few quid - leave the next direct debit to go through putting the loan into credit - they will refund and you have saved the ESF.

MataNui

Depends on your terms for for most loans that allow overpayments then your scenario would work.

Herzlos

So the 56 days is about £275, which is a fair whack.

In the past I've paid off all-bar a month and a bits payments, so the next month was a full payment and the 2nd month was the balance and IIRC I was only charged the interest on the outstanding balance when it was cleared (pennies).

It's worth checking your terms to see how they calculate it, but even with that approach the worst case is you'll have to pay about the same amount of interest anyway.

DebtFreeDuo

I made a part overpayment a few months back on one of my loans and was charged the 56 days on the amount I overpaid by.

jonesMUFCforever

DebtFreeDuo wrote: »

I made a part overpayment a few months back on one of my loans and was charged the 56 days on the amount I overpaid by.

Which is the reason I suggested that the OP checks first if he can make free overpayments!