Settling a loan early

bclark

This may be a simple answer but a lot of the information I have found online is quite confusing.

If I want to settle a loan early does the settlement figure include all of the interest that I would have paid if I carried on until the end of the term or does that get deducted from the settlement figure?

Also the loan in question is a business loan rather than a personal one so does that make a difference?

I ask because I have a business loan that has two years left to run, from an initial period of three years, and the settlement figure they have given me is only £150 less than I would pay if I just made the payments every month for the next two years.

I had thought that there was a benefit to paying back a loan early as you save the interest payments but perhaps I just imagined this?

DrEskimo

Well there is a benefit...you save £150? The amount you save will depend on how much interest you are being charged.

If the £150 is lower than you expect, it could be that the finance company are charging you an early repayment fee, which is factored into the settlement calculation. Is there any mention of an early repayment fee in the T&C's?

bclark

No there is no early repayment figure, they are quite clear on that.

So am I correct in thinking that the entire interest that would have been paid to the loan company is due even if we pay the loan back two years early?

I have done a couple of online loan calculators and they suggest the settlement figure would be around £11,500 and yet the figure we have been given is £14,500?

The original loan was for £15,000 and we have made 11 payment of £575.66. Just seems high to me?

bclark

I have just seen that our loan is unregulated so that appears to be outside of the consumer credit act.

I assume that’s where we are going to be done.

Oh well ��

foxy-stoat

Who is the lender?
What was the original interest rate and term?

DrEskimo

bclark wrote: »

I have just seen that our loan is unregulated so that appears to be outside of the consumer credit act.

I assume that’s where we are going to be done.

Oh well ��

Ah sorry, this is beyond me! Hopefully some more knowledgeable members will be able to help. Quick Google suggests your right, you are still liable to all remaining payments and the company may offer you a small reduction.

But yes, based on your numbers I concur, the settlement should be around £11,460, leading you to saving around £2,350 in interest (around 25% APR?).

Nearlyold

Is your business - Sole Trader, Partnership or Limited Company? Loans to the latter would not be covered by the European Consumer Credit Directive or the previous UK Early settlement regulations.

If Sole Trader or Partnership did you sign any sort of High Net Worth/Income Declaration?

bclark

It’s a ltd company so it seems as if I am screwed.

Ebe_Scrooge

jamespeter2296 wrote: »

In another way, you may improve your credit score if you repay your loan regularly without fail.

You may very well do so - unfortunately your credit score matters not one jot to anyone apart from you and the CRA.

Gaz83

jamespeter2296 wrote: »

Hi, before you make an early settlement most of the lenders will charge an early closure charge it all depends upon the lender's agreement. And there is no concept of escaping from the interest rate. The amount will be calculated for the whole term of the loan agreement. In another way, you may improve your credit score if you repay your loan regularly without fail.

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