How to avoid settlement interest

MumOf2

I've made partial overpayments before and then left a small amount for the next direct debit and the early repayment charge is only levied on the final (small) payment. This works with Sainsbury's personal loans just fine.


So you have £1000 left to pay. Make a partial overpayment of, say £950 (with Sainsbury's you just give them a ring to advise them), leaving £50 left to pay. When you phone ensure that the direct debit amount is left the same as in the original contract rather than them leaving the term of the loan the same. This will usually be more than the small amount left on the loan but that's fine as they only take what's actually owing at that point. The early repayment charge of 58 days' interest is levied on £50 only and the whole amount is taken in the next dd and the loan fully repaid.


This normally results in a significant saving in loan interest and only a minimal early repayment charge. It's something I picked up from this site and it's worked really well for me. Not only Sainsburys but car finance as well - did a good deal by taking out dealer loan for a new car, paid a month then made a partial early repayment of 95% of the loan to a zero interest credit card for 23 months leaving only a modest early repayment charge on the remainder which was taken by dd the next month and cleared the loan completely. The cc will be fully repaid by the time the zero interest deal comes to an end and I reckon I saved about £3500 on the price of the car which is good enough for me.


Best of luck.


MumOf2