Loan query

Clive_Woody

foxy-stoat wrote: »

I have only made 1 over payment on my loan, but its not a reason for me to change banks over a few pounds.

There's lots of other perks banking with Nationwide...but it's your money to spend as you wish.

John_G_Jones

dottydebts wrote: »

Thanks all for your replies - I think what I will do is save a chunk and overpay a larger amount - was hoping to just pay an extra £100 a month or so but I don’t think this would make sense now. I will probably save until I have about £1500 and then reduce the loan term.

That makes no sense. Pay it off as quickly as you can. You get the same charge overpaying £100 a month for fifteen months as you do waiting and paying off the £1,500 in a lump but will have been hit with higher interest along the way on the latter.

dottydebts

Having checked with the bank the 58 days interest is applied each time I make an overpayment so for it to make financial sense I need to ensure each overpayment is more than the interest charge surely? So paying £100 per month would lead to me being charged additional interest each month?

[Deleted User]

dottydebts wrote: »

Having checked with the bank the 58 days interest is applied each time I make an overpayment so for it to make financial sense I need to ensure each overpayment is more than the interest charge surely?

Every overpayment will always be more than the interest charge, even if you only paid a penny.

dottydebts

Deleted_User wrote: »

Every overpayment will always be more than the interest charge, even if you only paid a penny.

Thank-you - I still seem to be very confused about all of this! My previous cars have been on finance but as this was a much lower interest rate than what the dealership was offering I thought it would be the best way to go.

So if I (hypothetically) pay £100 from the loan today, and another additional £100 after the scheduled payment I still end up saving interest costs in the long run? Some months I will be able to pay more, others I may pay less but I suppose that is the point of overpayments?

Apologies for the lack of understanding, this is the first bank loan I have had.

[Deleted User]

The earlier you pay, and the more you pay, the less interest you will pay.

dottydebts

Thank-you - I guess I’d better start paying then!

Final question - is there any additional benefit with either reducing monthly payments vs. reducing the term in the long run? As I type this I’m thinking reducing the term will reduce total interest paid further but I could be wrong again!

[Deleted User]

If you reduce the payments, then your start to increase the interest again and reduce the benefit of overpaying.

Your aim is to pay as much as you can, as soon as you can.

The more you overpay, the shorter the term will become.

dottydebts

Thanks again, it gives the option to either reduce payment or terms in my online banking so wanted to check my thinking was correct!

Thanks you for explaining everything - I really do appreciate it and feel slightly more knowledgeable!