Overpayment vs settling a loan

fpuk

Hi all,
I took out a Lloyds personal loan to increase my credit score. I want to close this loan and the official way is to settle for it, but this will end up paying even more than if I will continue with it for the remaining months. The unofficial way is to make an overpayment, but I'm not sure how this would work.
Currently my balance is - £ 2,176.68
If I will make an overpayment for the entire amount it says: New Balance 0 saving you £112 interest Remaining repayments 0 months reduced by 5 months
If I will settle: Total amount to settle the loan £ 2,212.63 
What it will happen next month  if I will make that overpayment for the entire amount? From what I read it's best to make an overpayment a little bit smaller than the total amount and settle the loan after the rest will be taken from the account. How does this work?
Thank you

Nearlyold

I think your are slightly confusing what your current balance is - it's not the amount left to pay it's the amount you currently owe, it will reduce each month by your monthly payment then increase slightly again on a daily basis as interest is added then reduce again by the following monthly payment etc. (although interest may be internally added on a daily basis it usually only shows on your account as a total added for the month)

The settlement figure is your current balance plus up to 2 months interest if there is more than a year to go or up to 1 months interest if under a year to go.

It generally used to be the case that if you made an overpayment just short of the current balance and let the next month's DD clear the small shortfall, the 1 or 2 months interest charge would not apply or be just on the now tiny balance, however following the introduction of the "European Consumer Credit Directive" which gave the absolute right to make partial settlements  the UK early settlement regulations were amended so that lenders could also charge early settlement fees on partial settlements.

You need to check your specific loan T&Cs to see if an early settlement fee is payable on partial settlement. 

[Deleted User]

Who told you it would be a good idea to take out a loan to improve the fictitious credit score nonsense? I would stop taking advice from them as they don't know credit ratings work.