Loan Query

cadboll

I apologise at the start for the simplicity of my query - but I'm looking advice!

I took out a £5,500 loan last year - its a four year loan - payments £127.91/mth. My intention was always to pay this back early, but I wanted to keep the payments low. Whether I was right in my thinking I don't know!

My current thinking is to pay in a lump sum to the loan at the end of year 2. I will have paid back £3,069.84 at this point. My lump sum will probably be about £1,300 or so. By doing so this will reduce my loan amount, the monthly payments, and the total interest.

Perhaps I've already answered my own question - but does the above make sense?

Thanks.

CLAPTON

I'm afraid you need to read the T&Cs of your particular loan

Firstly are you allowed to made oneoff or over payments?

If so, usually one off payment (or overpayments) reduce the term of the loan and the normal monthly payment stays the same.

You need to read carefully about whether the total interest is reduced however. If it and there are no other penalties then fine but if not then you best save the money in a high interest rate saving account until you have enough to settle the loan in full.