Loan Overpayents - how does it work

pecuniam_hominem

Hello,

I took out a loan a few months ago, and I knew I was going to be in a position to overpay after a short time. My question, what actually happens with the overpayment? I am aware that most loans have the interest front loaded, so at the start of the loan, the portion of the monthly payment that goes on interest is fairly high.

So say the loan is £100 per month, and I overpay by £100, essentially doubling the payment, does ALL that £100 just pay off the principle? I assume my payments remain the same... but I then get charged less interest and the amount of payments goes down?

The company has really rubbish systems, so its not clear all on what is actually going behind the scenes. I have had loans from companies previously where it is a lot more transparent (lendable is great in this regard).

Thanks!

[Deleted User]

No loans have front loaded interest.  It is calculated daily.  You pay more interest at the start simply because you owe more money at the start.

Any overpayment you make will come straight off the capital, as the interest is paid off with each monthly payment.

MallyGirl

sometimes you get asked whether you want to reduce your payments or reduce the term when overpaying