Quick question regarding Sainsbury's loan Overpayment/Settlement

prettywowers

Quick question:

I've asked for a settlement figure from Sainsburys which is higher than the remaining outstanding amount (£4064 vs. £4019 on a 5 year loan @ 6.10% APR).


I read in another thread that it may be "Moneysaving" to overpay all but £1 in order to avoid some of the charges as follows: "This settlement figure includes up to 58 days interest - 30 days additional interest for settling early and 28 days interest which takes you to when the settlement quote expires". 


Just wondering if anyone has experience of this, and is it worth it to save (presumably) the 30 days of interest? 

Thanks all!

[Deleted User]

The settlement figure will be less than the outstanding amount unless you're within the last couple of months of the term.

Paying all but a small amount may reduce the ERC. But either way, it's still worth settling early.

prettywowers

Deleted_User said:

The settlement figure will be less than the outstanding amount unless you're within the last couple of months of the term.

Paying all but a small amount may reduce the ERC. But either way, it's still worth settling early.

Thanks, but it isn't for some reason - the settlement figure is higher by £45 (settlement figure is £4064, outstanding balance is £4019), and I still have 26 payments left to make.

Loan was for £8500 over 60 months at 6.10% APR. 

I was hoping to pay them £4018, for example, then the last £1 by my regular Direct Debit.

[Deleted User]

Setting early will save all the future interest.

Trying paying less to minimIse the ERC, but either way, you'll still save.

Nearlyold

Whether paying "them £4018, for example, then the last £1 by regular Direct Debit" will reduce the ERC or not depends of the terms and conditions of the loan.

The Early Settlement Regulations were amended when the European Credit Directive introduced the right to make partial settlements to allow an ERC to be levied on both partial settlements (aka overpayments) and full settlements.

The lender can always waive any partial or full settlement fees if they choose to of course, but are perfectly entitled to charge them. 

Jami74

Some banks apply the same rules to overpayments as they do for early settlement, in which case you'll pay 56 days interest whether you pay it all off in one go or just pay a chunk off.

You need to check what Sainsburys do. Maybe phone them and ask about making an large overpayment. Obviously you'll carry on accruing interest on the part you don't pay off.