Salary Finance

Grumpy_chap

Making extra overpayments, but then keeping the future monthly payments the same, will result in the total payable (i.e. interest) reducing over the term.

Otherwise it would be front loading which is no longer permitted.

Not all lenders show this clearly, as they want you to think overpayments are not worth it

Jami74

Superhoop91 said:

My only gripe, which I'm challenging them on is that I made a payment of £500 which has reduced my next payment amount but not changed any other payment amounts, therefore my interest hasn't been reduced. It states in my contract and in the FAQs that early payments will reduce the total amount of interest paid. I raised this and was told that my interest would not be reduced for making a payment, it would just help the loan be repaid quicker.

I think it's all in the wording. No, it won't reduce the interest, you will still pay 9.9% APR. However because you'll have repaid it sooner then the total amount of interest you pay will be less (once the loan has ended, you won't still be paying the interest). 

Out of interest, is your monthly amount more than £500 a month? Was wondering if they thought you had paid it early that month rather than wanting to pay an extra £500 off the loan in addition to your usual payments.

Superhoopza

Ok so I've had a response back and it doesn't feel right. They are saying my overpayment will go towards the end of the loan term and bring forward the date of when the last scheduled payment is.

Therefore they have not reduced my principal amount of which monthly interest should be charged. This has meant the £500 additional payment on a loan with another 15 months remaining is only saving me about £5, as I am only saving the interest that would be charged in the final month of the loan, not a saving every month. That's wrong isn't it?

Thanks all

Superhoopza

Jami74 said:

Superhoop91 said:

My only gripe, which I'm challenging them on is that I made a payment of £500 which has reduced my next payment amount but not changed any other payment amounts, therefore my interest hasn't been reduced. It states in my contract and in the FAQs that early payments will reduce the total amount of interest paid. I raised this and was told that my interest would not be reduced for making a payment, it would just help the loan be repaid quicker.

I think it's all in the wording. No, it won't reduce the interest, you will still pay 9.9% APR. However because you'll have repaid it sooner then the total amount of interest you pay will be less (once the loan has ended, you won't still be paying the interest). 

Out of interest, is your monthly amount more than £500 a month? Was wondering if they thought you had paid it early that month rather than wanting to pay an extra £500 off the loan in addition to your usual payments.

Monthly repayments are £600 so yes it now says my next repayment will only be £100 so they have taken the payment as any early repayment, not an additional repayment, despite the wording on their email recognising that it is an additional repayment