Partial early settlement - front loaded interest

JohnsonsDreadlock

I'm 9 months into a 5 year term on a personal loan. The interest was front loaded. I've got around 16k left on the balance and Online I've got a settlement figure of around 15k

I've got 14k I can pay today. 

Spoken to the lender and they can't seem to be able to explain to me what my balance should be if I make that payment. Will it be closer to 1000 or 2000
Feel like I may accidently end up losing out. Can't find the additional 1000 to make the settlement figure. Any wisdom out there? 

[Deleted User]

There's no front loaded interest on your loan.  Interest is calculated daily.

Your settlement figure of 15k will probably include two months interest, which means your current balance is  £14k something. If you make a payment of £14k, you'll have a few hundred remaining.

fwor

JohnsonsDreadlock said:

The interest was front loaded.

Unless you borrowed from "Honest Dave" down your local pub, this is unlikely. You pay more interest early in a loan because you have more capital outstanding, but that's not the same as "front loaded".

If you say what APR you're paying and what the original amount borrowed was, someone will probably put your figures into one of the online loan repayment calculators for you, which will show you exactly how much you'll be paying.

JohnsonsDreadlock

Deleted_User said:

There's no front loaded interest on your loan.  Interest is calculated daily.

Your settlement figure of 15k will probably include two months interest, which means your current balance is  £14k something. If you make a payment of £14k, you'll have a few hundred remaining.

It's confusing because they'd clearly put the full balance and interest of the term on their portal from the start

[Deleted User]

That shows the full amount if the loan goes to term.

It's not your current balance. 

JohnsonsDreadlock

That's the terminology they have used hence my confusion and questions

[Deleted User]

Now you know the real situation, you should go ahead and make the 14k payment as soon as you can. That will reduce further interest considerably.

JohnsonsDreadlock

Bit the bullet

14k paid
£14972.53 deducted from current balance! 

[Deleted User]

@JohnsonsDreadlock, good one you, it feels good to get rid of debt, doesn't it - now you can breathe easier 👍

nyermen

It can be annoyingly confusing.  What is often described as front loaded is likely referring to "Constant Principal and Interest Annuity", which means you pay the same amount each period (assuming rate doesnt change).  Inevitably you end up paying more interest at the beginning of the loan than at the end (since it's "calculated" each period), hence why the sooner you prepay / part repay (if an option) the better the overall saving on interest.
In Excel, there's a function PMT (or used to be) which can be used to calculate the regular amount from the total amount, total periods, and interest rate.