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Paying off TSB loan early

ministe2003
ministe2003 Posts: 51 Forumite
Tenth Anniversary 10 Posts Combo Breaker
edited 11 February 2021 pm28 12:52PM in Loans
Hi, I've searched the board for advice on this but similar threads are a few years old so I wanted to try and get some up to date advice.  I took out a 4 year car loan with TSB last summer, actually bought a cheaper car than I planned so was able to overpay some of it back almost immediately and have made another overpayment since.  I'm actually in a position where I can make another overpayment and I could clear the loan already, but I want to find out the most cost effective way to do this.  Some old suggestions I've read are
  • Overpay but leave the amount of 1 month's direct debit on the loan, when that payment is taken, the balance is 0, voilà, done.
  • Overpay but leave £10 and ask for a settlement cost
  • call for a settlement cost before making the overpayment
Do either of the first two methods still work, does anyone know with recent experience?  I could call TSB and ask but my concern is that if I do they'll force me down some expensive route.

The website says "You can repay your loan in full or part at any time during the repayment period and we'll reduce the charge for credit you've agreed to pay us."  I'm not sure what that means, do that mean they'll reduce the charge to whatever balance is remaining?  It also says they "charge up to 58 days interest."  But if they're only doing that on the balance remaining, if I overpay down to something like £10 as suggested elsewhere, that'll be very little.  Am I misunderstanding?
 Thanks
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Comments

  • What we did with a Lloyds loan (which had the same overpayment/early repayment penalty) was to overpay everything except about £50. Then the loan finished naturally with the next month's payment - which was the £50 principle still owing, plus about 20p interest.
  • You may get away with paying most of it and letting the DD take the final payment, or they may charge an ERC on the overpayment.

    The wording means that if you repay early, you'll pay less interest as the balance is lower.
  • You may get away with paying most of it and letting the DD take the final payment, or they may charge an ERC on the overpayment.

    The wording means that if you repay early, you'll pay less interest as the balance is lower.
    Yes its the maybe which is concerning me.  The poster just before you says they were able to do exactly that, but looks like that was directly through lloyds so not sure it's exactly the same
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    edited 11 February 2021 pm28 2:50PM
    Different lenders have different policies.

    But either way, you may as well try it.  You're not going to be worse off because of it, bar a couple of pence additional interest.
  • about to consider a TSB loan as been with them nearly 20 years and need £5k to put towards a car, waiting on £2k coming in so only actually need £3k but maybe a few months before the £2k arrives. Don't mean to hijack the thread, just never bought a car before until now in my mid 30s. So, I will be following this thread. The part I don't understand is, if there are early repayment charges, why won't they just charge you this when the final direct debit takes your final payment (early eg 6 months before the loan is meant to be cleared...) ??
  • D_UK_85 said:
    about to consider a TSB loan as been with them nearly 20 years and need £5k to put towards a car, waiting on £2k coming in so only actually need £3k but maybe a few months before the £2k arrives. Don't mean to hijack the thread, just never bought a car before until now in my mid 30s. So, I will be following this thread. The part I don't understand is, if there are early repayment charges, why won't they just charge you this when the final direct debit takes your final payment (early eg 6 months before the loan is meant to be cleared...) ??
    Why not just ask TSB before you apply?
  • D_UK_85 said:
    about to consider a TSB loan as been with them nearly 20 years and need £5k to put towards a car, waiting on £2k coming in so only actually need £3k but maybe a few months before the £2k arrives. Don't mean to hijack the thread, just never bought a car before until now in my mid 30s. So, I will be following this thread. The part I don't understand is, if there are early repayment charges, why won't they just charge you this when the final direct debit takes your final payment (early eg 6 months before the loan is meant to be cleared...) ??
    Why not just ask TSB before you apply?
    Posters in other threads have commented how hard it is to get them to be honest about this.  I'll try to remember to post an update on my experience once I've tried paying it off 
  • Aran76
    Aran76 Posts: 36 Forumite
    Seventh Anniversary 10 Posts
    edited 25 February 2021 am28 7:54AM
    I also took out a TSB loan last summer. It says in the T's & C's that if I repay the whole of the loan I will be charged up to 58 days interest but if I partially repay then I will not be charged. 

  • D_UK_85 said:
    about to consider a TSB loan as been with them nearly 20 years and need £5k to put towards a car, waiting on £2k coming in so only actually need £3k but maybe a few months before the £2k arrives. Don't mean to hijack the thread, just never bought a car before until now in my mid 30s. So, I will be following this thread. The part I don't understand is, if there are early repayment charges, why won't they just charge you this when the final direct debit takes your final payment (early eg 6 months before the loan is meant to be cleared...) ??
    Why not just ask TSB before you apply?
    Posters in other threads have commented how hard it is to get them to be honest about this.  I'll try to remember to post an update on my experience once I've tried paying it off 
    I highly doubt, by your implication, TSB are being dishonest, more like front line staff are trained not to give anything that might be considered financial advice as it could come back to bite the company. 
  • Aran76 said:
    I also took out a TSB loan last summer. It says in the T's & C's that if I repay the whole of the loan I will be charged up to 58 days interest but if I partially repay then I will not be charged. 

    If that's 58 days' interest based on the balance at the time you get a settlement then that's fine, and why people suggest paying off everything but £10 before you ask for a settlement
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