Extra loan payment question

Jami74

I've recently taken out a £5k loan with Natwest over 36 months at 6.9%. The monthly payments are £153.70 and the total interest I will pay over the three years is £533.20.

I am trying to understand the terms for making extra payments. I know it's probably really simple but it's my first loan and I don't want to make any stupid mistakes.

It says:
The repayment fee will be an amount equal to 58 days interest of the Annual Rate of Interest calculated on a daily basis on the amount by which the outstanding balance of the loan is reduced by the over payment.

Does that mean that if at some point, eg after 24 months, I want to pay the loan off in full I would need to pay what I still owe of the £5533.20 plus an extra two months interest? Or that I'd only pay two months interest instead of 12 and I would save some money by not paying the other ten months interest?

I want to know whether it is worth paying off an extra £100 here and there if I can afford it, or best just to stick to what it is.

Thank-you

Craig1981

Morning

according to their website:
58 days interest if the loan term was more than 12 months
28 days if the loan term was 12 months or less
Interest is charged on the amount of the overpayment

so going by this, each additional overpayment, you will pay interest on, but in the long run, will still save interest over all
it is usual to charge 58 days interest when settling a loan in full. so on month 24, you will pay 58 days interest on the remaining balance

Jami74

Thank-you for answering.

So in short, if I make an over payment it will save me money rather than cost me money? I won't be paying extra interest on top of what I already need to pay?

Also, if I make an over payment will my monthly repayments then reduce or will the loan just end sooner?

Sorry for the daft questions.

[Deleted User]

Overpaying will save you money as you pay less interest.

Your term will shorten.

Jami74

Deleted_User wrote: »

Overpaying will save you money as you pay less interest.

Your term will shorten.

Thank-you very much. Now I understand.