Ratesetter - Early repayment

HustleGang

Hi all,

I need a loan. Ratesetter will give me £4500. Total repayable is £5700. High interest. This SHOULDN'T be a problem as I intend on repaying early, by overpaying and using my current car sale to pay off a chunk.

My question,

If I make, for example an overpayment of £2000, is the £2000 coming off of the £4500, or the £5700?

I had a loan in the past (2019, likely loans) and interest was front loaded, so my overpayments basically weren't helping, majority of overpayments was attacking the total interest of the loan, even though I made hefty overpayments a few months after taking the loan .

Any input or advice?

MorningcoffeeIV

Overpayments always comes off the capital.

Interest is never front loaded, including your Likely Loans one.

Nebulous2

Repaying early always gives you a rebate on the interest. The most a lender is allowed to charge for early repayment is two months interest, which can obviously be heftier on a high interest loan. 

Where there becomes an issue is how an overpayment is treated. Lenders may use it to reduce the term, reduce the monthly payment or both. The conditions I can see for ratesetter say that they reduce the term, so your monthly repayment would stay the same. 

Frequently Asked Questions | RateSetter

"The amount paid will be deducted from the total balance of your loan. Once the payment has cleared, your term will automatically reduce."