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When paying off a loan early, do you pay the remaining principal or remaining principal + interest?
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I'm planning on getting a loan of £3,000 from RBS. Fixed APR is 19.9%. And I was looking at over 5 years, but the duration is something I'm trying to work out. This isn't great as I understand it, but this will be my first piece of credit history, so my score is simply average. And it's a penalty I'm willing to incur to get things on track. At first I was calculating things wrong.. The 'total amount repayable' I received on £3,000 over 5 years was £4,599. So I calculated the amount of interest as £1,599 / 60 months = £26.65/pm. But this is wrong right.. It's actually £3000 x 0.199 = £49.75/pm. On top of that, you pay more interest earlier on in to the loan and more principal towards the end.. I imagaine this is to dissuade early repayment. This makes sense in hindsight. I guess it was just naivety thinking loans are so straightforward.
So getting to the point, my original plan was to pay monthly for 12 months, and then pay the remainder after that period along with the 58 day interest fee.. What I thought was £53.3, but is actually £99.5. By doing this, I thought I'd be saving A LOT of money on interest, but they've obviously set it up in a way where you can't do that? I don't know, it's confusing me. If I decide to pay my loan off after a year, what am I looking at paying? Am I paying the remaining £2,600 of the actual amount I borrowed + 58 days interest.. Or am I paying the remaining 'total amount repayable' + the 58 day fee?
Any help would be appretiated, my head feels like it's going to pop!