How to avoid the 58 days interest being added to the early settlement of a loan???

jamesbenjamin

So in May of this year I took a loan from Admiral for £8000 over 4 years 16.3APR  £223 per month payments. 

Since then my credit file has improved and I can get loan at much more reasonable rate.  I would like to pay off the remaining Admiral loan by using a lower interest loan of £7500.  I could reduce my interest payments by £40+ per month.

I have £7353 outstanding on the Admiral loan, but to repay it would be £7689 as they add 58 days interest for an early settlement.  Is there any way to avoid this interest?  For example, if I paid off £7000 as an 'over payment' leaving £353 which I would pay off over two months would the 'over payment' of £7000 also incur 58 days interest?

I have read all through the t&c and can't find the answer.  If anyone here knows if this would work?  Do you have to pay 58 days interest on over payments or just on full settlements?

Many thanks in advance

mcpitman

Surprised your credit worthiness has changed that much in c6 month.

Anyhoo, best to check T&C's but your thoughts would be correct with many other lenders to avoid and early payment charges.

Ebe_Scrooge

jamesbenjamin said:
Since then my credit file has improved and I can get loan at much more reasonable rate. 

Just a word of caution - you can't possibly know that you can get another loan at a lower rate until you've applied and been accepted.  Remember that any "representative APR" that's advertised is only offered to 51% of successful applicants.

Your application will be assessed on the basis that the new loan is in addition to your existing loan - the lender has no way of guaranteeing that you will actually use the new loan to clear the old one.  So they'll assume that, should they give you the loan, your total debt will now be £15,000, and they'll price it accordingly.

Sncjw

There's no garuntee you will get lower rate. It is a risk as the person said above you will be doubling your debt even with your intentions to pay the current debt off. They will assess you in risk and affordability of 15k in loans.. 

jamesbenjamin

Cheers all.  I was accepted for a loan of £7500 at 7.9% so payments of £181 per month saves £42 per month.

My credit worthiness has greatly improved over 6m as I really have been paying off CC debt fast and cleared all my overdrafts.  No missed payments for years.  However I am pretty amazed that I have been granted £15000 over two loans.  My income is not high.

I read t&c and not sure if I will be hit with 58 days interest if I do a partial payment.  It isn't clear, but I still pay less even if I do get hit by it.

Thanks again

Ebe_Scrooge

Well it's great news that you've managed to secure a "replacement" loan at a lower rate.  You must understand the scepticism in the previous comments - it doesn't very often work out that way, but good on you that it did, and that's heartening to hear.

Being ultra-sensible now, the prudent thing would be to pay that extra £42 per month towards any other debts.  Concentrate on any high-interest debts you have (credit cards are the obvious ones, if you still owe anything), or else make overpayments to this new loan - if you can do so without penalty.

Remember, in general, overpaying any debt has a double benefit - you repay the capital more quickly, and reduce the amount of interest you pay.

Not meaning to preach - it's fantastic that you've got this result, and I'm genuinely happy for you.  But you still owe this money, and the quicker (and more cheaply) you can repay it, the sooner you can spend that money each month on fun stuff :-).  Or save it for a rainy day, depending on your priorities.

jamesbenjamin

Not at all, preach away! Lol.  I wish I had the money sense I have now only when I was in my 20's.

I'm clearing debt with a mind to getting a mortgage and finally getting on the property ladder at the grand age of 39.

I'm currently snowballing paying off my debt.  I wish I could have accessed the lower interest rates and interest free balance transfers years ago!

Dandytf

OP

Well done and thanks for your positive Admiral experience.

Today I've been accepted from Admiral 2k 42 months 10.1 apr.
New FD30 front door next year.

thanks

DrEskimo

Dandytf said:

OP

Well done and thanks for your positive Admiral experience.

Today I've been accepted from Admiral 2k 42 months 10.1 apr.
New FD30 front door next year.

thanks

If you could afford to double your repayments to £87/month, you could apply for a 0% purchase credit card and buy the door with that.

Be debt free in nearly half the time, and save yourself £340 in interest charges.

Dandytf

DrEskimo said:

Dandytf said:

OP

Well done and thanks for your positive Admiral experience.

Today I've been accepted from Admiral 2k 42 months 10.1 apr.
New FD30 front door next year.

thanks

If you could afford to double your repayments to £87/month, you could apply for a 0% purchase credit card and buy the door with that.

Be debt free in nearly half the time, and save yourself £340 in interest charges.

I did consider existing rbs 7.9 balance transfer from another existing card.
Another option could be to use up to 16 months of 20 months 0% VM card.

Though as I have windows from 60 per month next year, I don't mind some extra for door.

Windows are taking priority in reducing term, once I complete next 3 years then it opens up options in terms of car finance finishing.

What I  must ensure is that I don't head towards consolidation situation.

thanks

Bar2020

Yes that works. I’ve done it. 

Pay the majority off and leave leave less than your monthly payment still to pay. The remainder will be paid on your next monthly installment without incurring interest for the full amount.

Of course check your personal tcs first so there’s no hidden clauses. But I have never been charged the added interest doing it this way.