Loan settlement vs large overpayment.

in Loans
3 replies 240 views
FafferUKFafferUK Forumite
5 Posts
First Anniversary First Post
I've been approved for a lloyds personal loan for a car at 3.9%. We will probably be a in position to settle the loan within a few months of taking it due to some business money coming through but it could take longer.

Settling early would incur a charge of 58 days interest added onto the balance. There doesn't seem to be the same charge with overpayments though. Looks like I could theoretically overpay the balance minus say one months repayment and only pay interest on the remaining low balance. The loan would the automatically settle after the regular payment goes through?

Anyone else tried this or know if there is a catch?


  • Yes, you can do that.
  • MrFrugalFeverMrFrugalFever Forumite
    825 Posts
    500 Posts Second Anniversary Photogenic Name Dropper
    Under the consumer credit act 1974 the lender is entitled to charge up to 58 days interest in the event of a full settlement, otherwise they’ve administered a loan for nil cost, which simply just doesn’t work.
    I would imagine that even with your theory, you’ll still need to pay 58 days interest. The only time there is very minimal interest charged (sometimes nil with personal loans) is if the agreement has been withdrawn within 14 days as a ‘cooling-off’ period.
    Save £12k in 2023 challenge

    Jan = £715 / £1,000 Feb = £1,275 Mar = £400  (fallen behind will make up in April)
    Apr = £ May = £ Jun = £
    Jul = £ Aug = £ Sept = £
    Oct = £ Nov = £ Dec = £

    Saved Total = £1,990 / £12,000
  • Edi81Edi81 Forumite
    1.3K Posts
    Ninth Anniversary 1,000 Posts Name Dropper Combo Breaker
    With Lloyds make a large overpayment and let your direct debit make the last payment. 
Sign In or Register to comment.
Latest MSE News and Guides

Did you know there's an MSE app?

It's free & available on iOS & Android


Regifting: good idea or not?

Add your two cents to the discussion

MSE Forum

Energy Price Guarantee calculator

How much you'll likely pay from April

MSE Tools