Overpayments and fees - monthly or lump sum

KnitNutter

Hi all, this is my first post so apologies if it has been answered, I did look but couldn't see anything relevant. I also suspect the answer is obvious, but I can't get my head around it, so would appreciate your help.

I have a personal, unsecured bank loan and may be in a position soon to make some overpayments. As there is a fee of 30 days interest on the amount being settled, does it make any difference in the fees if I pay off a little extra on a monthly basis, or is it better to save up a lump and pay that? My 'savings' would be in a Santander 123 current account, which pays 1.50% AER/1.49% gross (variable). The loan is 7.8% APR I suspect it is better to pay little and often to reduce the overall amount owed. Is that right?

Thanks, in advance.

foxy-stoat

The fee with be based on how much you overpay. So if you want to make a lump sum of £1200 or 12 x £100 payments the total fee you pay will be the same - just keep the monthly payments the same and shorten your loan term.

Unless there is a fee free payment amount on your loan you may as well make the biggest lump sum overpayment you can, you will save more money that way.