Want to pay off loan but am confused

financegirl

Hi there,

Took out a loan for £20,000. Can afford to pay off £10k of it now but when i phoned up the loan company they gave me a settlement figure of £19,908. Obviously can't afford to pay all this off and want to pay off £10k. They said that would come off the BALANCe of the loan which is £28,000, meaning I'll still have to pay over 18,000 back.

Whay can't they take the £10k off the settlement figure of £19,908 - then I'll have £9,908 left to pay.

Am confused the guy on the phone says there's no point in paying off chunks (even though there' no charges) he said to put the £10k in a savings account and keep saving and then pay it all off in one lump sum when I can afford it.

BUT there's obviously no saving accounts with higher interest rates than the loan. The loan is 7.9%. Am I making sense - I'm confused about the balance and settlement figures. Help please

CLAPTON

you need to read the T&Cs of the loan and see what it says about the terms for
a. early settlement
and
b. making overpayments

usually early settlement figures are regulated by the CCA but over (partial) repayments are not, so sometimes it makes no sense to make partial payments and you're best to save the money until you can pay the early settlement figure.

The balance figure is the amount you are due to pay if the loan runs to completion whilst the settlement figure is much less because you wont be charged interest once you have paid off the capital plus early settlement charge.

Without knowing the full loan details it difficult to be more specific.

How long was the loan for
how many payments have you make
didi it include PPI
who's it with (in case the T&Cs are on the website)