Making overpayments.

selinek

Hi 👋

I took out £8500 car finance with blue motor finance in 2017 for 5 years. The APR at the time was 16.1%. My credit rating was not great then. Now considerably better, where it’s excellent .mainly down to the advice from this site. The Total payment was circa £12700. I have over paid when I could. balance is now £7900. There was an issue with rebate as the finance company system made errors in the calculation. Now sorted I want to make over payments to bring down the term. I have been informed by the company there have been changes in the last of months. I can continue to over pay but will only receive a rebate if I make payments equivalent to or higher than my monthly installment. If I pay less then monthly installment I will receive the rebate when I pay off loan. Is this correct? The interest is front loaded

I am considering on swapping loan to one that is less interest. I am eligible for 3% loans. What a difference a few months make!
See the Early Repayments section from the t&c I signed in 2017

EARLY REPAYMENT
Under section 94 of the Consumer Credit Act 1974 you can settle this Agreement in part or in full at any time. If you do not repay in full any early payment will not reduce the duration of the credit agreement but we will recalculate the amount of the remaining monthly instalments. If you wish to pay any amount early please give us notice by writing to us

Advice is greatly appreciated

[Deleted User]

Clarify with them exactly what they mean, but it doesn't appear to make a significant difference either way - your overpayments will reduce the amount of interest you pay and both will reduce the term to the same amount, and give the same result.

selinek wrote: »

The interest is front loaded

No, it's not. Not on a 2017 loan.

Remember that you may not get a lower rate loan, as you will be doubling your rate and will be assessed on the total borrowing.

selinek

Thank you for your quick response. Points noted. Just for my learning . Doesn’t front loading mean the interest is added at the beginning rather monthly ?

[Deleted User]

Yes - and that you have to pay the interest before the capital, meaning that you don't save anything through early settlement and you would be better just keeping the current loan. It's no longer legal.

Some lenders still show the total amount payable as the balance, but that's not front loaded.

selinek

I’m more armed with armed with the knowledge. Thanks again

DannyPearce90

Yes, you should refinance. Just make sure you are very confident that there are no other associated fees to consider. As sometimes these will put you in a worse scenario.

selinek

DannyPearce90 wrote: »

Yes, you should refinance. Just make sure you are very confident that there are no other associated fees to consider. As sometimes these will put you in a worse scenario.

There is noting in the credit agreement that the company will charge a penalty for early payment. I wont be hit with 58 days (or less) interest if its not stated in the agreement right ?

[Deleted User]

Correct. Any ERC needs to be stated in the agreement.

selinek

Deleted_User wrote: »

Correct. Any ERC needs to be stated in the agreement.

Thank you for clarifying this for me

jtmerralls

I would clarify the exact redemption figure.
I would also clarify that the 3% loan is available to you and not just a 'carrot'.
Then strongly consider a new 3% loan and repay the older one.