natwest loan

anubis68

Hi just a quick question im looking for a a car and have about 3 in my list to go and look at one at £3500 another at £5000 and the last at £7200. i can get a £7500 loan from natwest at 3.4%.
My question is if i bought the 3500 one and paid the £4000 of the loan back which i didnt need would the interst go up higher or stay the same? Also would there be a fee to pay on top?
Many thanks

[Deleted User]

Your interest rate doesn't change, but the balance it's calculated on does.

Check for any early repayment charges.

maas

Pretty much all banks should be allowing unlimited overpayments with no charge, and then a maximum of 2 months interest on the final overpayment/settlement. Check the t & c's

Nearlyold

maas wrote: »

Pretty much all banks should be allowing unlimited overpayments with no charge, and then a maximum of 2 months interest on the final overpayment/settlement. Check the t & c's

Not sure why you use the phrase "should be allowing unlimited overpayments with no charge" Lenders are perfectly entitled to apply the same maximum of two months interest to any overpayments (partial settlements) as they are to any final overpayment settlement.

maas

Nearlyold wrote: »

Not sure why you use the phrase "should be allowing unlimited overpayments with no charge" Lenders are perfectly entitled to apply the same maximum of two months interest to any overpayments (partial settlements) as they are to any final overpayment settlement.

Not according to

https://www.choose.co.uk/guide/early-loan-repayment-rights.html

£8000 seems to be the magical number and they cant charge for any overpayments up to this value for loans since 2011 after which point they can charge the 2 months on the final settlement.

Bermonia

Hmmm an article written 4 years ago on a website I’ve never heard of... seems legit enough

boo_star

maas wrote: »

Not according to

https://www.choose.co.uk/guide/early-loan-repayment-rights.html

£8000 seems to be the magical number and they cant charge for any overpayments up to this value for loans since 2011 after which point they can charge the 2 months on the final settlement.

Yeah, that article is complete bull spit.

Nearlyold

maas wrote: »

Not according to

https://www.choose.co.uk/guide/early-loan-repayment-rights.html

£8000 seems to be the magical number and they cant charge for any overpayments up to this value for loans since 2011 after which point they can charge the 2 months on the final settlement.

The charge is allowed - The article on this site is incorrect, whoever wrote it has misinterpreted the European Consumer Credit Directive which came into force in 2011.

All is explained here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34687/12-1264-consumer-credit-directive-guidance.pdf

In particular paragraphs 14.39 and 14.40 on page 67

Page 61 & 63 are in reference to 95A which allows for an additional charge to be made should the lender wish to do so subject to the conditions therein (which is what the article on the site is based on) however - this has no bearing on the 28/58 day interest charge which arises from the rebate calculation under the still existing early settlement regulations. In a nutshell nothing in 95A is intended to derogate the early settlement calculation rules used in 94


When a customer requests a full or partial early settlement the lender has to calculate a rebate of interest charges that would have otherwise been charged if the loan had continued as before. In calculating this rebate the assumed date of the full or partial early settlement is 28 days after the request or 58 days after (at the lenders discretion) if the loan has more than 12 months to run.


The customer then has 28 or 58 days in which to make the payment, if they make the payment earlier than the 28 or 58 day deadline the lender does not have to adjust the rebate of interest calculation already made, the customer is simply giving the lender some free working capital for a period.


NB The lender is always free to offer more generous terms than specified in the early settlement regulations - as some do of course

Nebulous2

You'll be able to pay extra and you'll save money over the course of the loan, regardless of whether you are charged 2 months interest on the repayment or not.

What you also need to watch is the lenders policy on partial repayments. Some will allow you to reduce the payments or the term, while others will keep the payments the same which reduces the term. Of course that's good if you can afford the payments as you pay it off sooner, but isn't so good if you were expecting the overpayment to reduce your outgoings.

maas

Nearlyold wrote: »

The charge is allowed - The article on this site is incorrect, whoever wrote it has misinterpreted the European Consumer Credit Directive which came into force in 2011.

All is explained here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34687/12-1264-consumer-credit-directive-guidance.pdf

In particular paragraphs 14.39 and 14.40 on page 67

Page 61 & 63 are in reference to 95A which allows for an additional charge to be made should the lender wish to do so subject to the conditions therein (which is what the article on the site is based on) however - this has no bearing on the 28/58 day interest charge which arises from the rebate calculation under the still existing early settlement regulations. In a nutshell nothing in 95A is intended to derogate the early settlement calculation rules used in 94


When a customer requests a full or partial early settlement the lender has to calculate a rebate of interest charges that would have otherwise been charged if the loan had continued as before. In calculating this rebate the assumed date of the full or partial early settlement is 28 days after the request or 58 days after (at the lenders discretion) if the loan has more than 12 months to run.


The customer then has 28 or 58 days in which to make the payment, if they make the payment earlier than the 28 or 58 day deadline the lender does not have to adjust the rebate of interest calculation already made, the customer is simply giving the lender some free working capital for a period.


NB The lender is always free to offer more generous terms than specified in the early settlement regulations - as some do of course

Thanks for that detailed response. I had read the same thing on several websites so it must be a common misinterpretation.

Thanks for clearing that up

Jami74

anubis68 wrote: »

My question is if i bought the 3500 one and paid the £4000 of the loan back which i didn't need would the interest go up higher or stay the same? Also would there be a fee to pay on top?
Many thanks

I have a Natwest loan. Each month the interest is calculated on how much you owe for that month and added on to the balance you owe.

So your initial balance starts as -£7500, then you make a payment so it then might be eg -£7282, then the interest you owe for that month is added on so the balance then might be eg -£7302.

They charge about two months interest on the amount of any money you overpay. So if you were to overpay £1000, it would take £1000 off the balance you owe and then add about £2.50 interest on.

Next month the interest added for the month would be lower because the amount you owe would be lower.

When you phone up to make an overpayment they ask if you want to shorten the loan length or reduce the monthly payments. You save more if you carry on paying the same monthly payments.

This Excel calculator shows you approximately your savings/payments etc: http://www.affordablecfo.com/Loan_calculator_with_extra_payments.xlt