Making overpayments on HP car finance - how does the 'saving interest' work?

101 Posts

Hi all
Looking for a bit of knowledge after Googling but I can't find definitive answers, so hopefully someone can help!
I have HP car finance through Santander, and have 19 months left of a 60 month agreement. My circumstances are now very different to when I got the car, and as I want to keep it, I opted to carry on with the finance, making overpayments where I can. Overpaying reduces the monthly payment but the term remains the same.
Santander and anything I read on Google tell me that making extra payments will save me interest. Santander even told me last month how much interest my last overpayment will save me. But I was just thinking that I don't know what that looks like. Am I having these amounts of interest deducted from the balance? Is it an amount I'll receive at the end of the term? Magical option c that I haven't thought of?
This has only just occurred to me and I can contact them on Monday, I just wanted to know how it worked because I can't quite visualise it. I get the premise, I just don't know how it works on paper.
Thanks!
Looking for a bit of knowledge after Googling but I can't find definitive answers, so hopefully someone can help!
I have HP car finance through Santander, and have 19 months left of a 60 month agreement. My circumstances are now very different to when I got the car, and as I want to keep it, I opted to carry on with the finance, making overpayments where I can. Overpaying reduces the monthly payment but the term remains the same.
Santander and anything I read on Google tell me that making extra payments will save me interest. Santander even told me last month how much interest my last overpayment will save me. But I was just thinking that I don't know what that looks like. Am I having these amounts of interest deducted from the balance? Is it an amount I'll receive at the end of the term? Magical option c that I haven't thought of?
This has only just occurred to me and I can contact them on Monday, I just wanted to know how it worked because I can't quite visualise it. I get the premise, I just don't know how it works on paper.
Thanks!
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So you don't see any payments back. What happens is you end up paying less interest (and therefore less overall) over the remaining term following the overpayment than you would have paid had you not made the overpayment (since the balance has been lowered more than originally agreed without the overpayments).
Only 19 months to go!
So you could set that difference aside and add it to any overpayments too
All the best with your debt free journey!
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SusieT said: Ahh if only... I can reduce the monthly payment by overpaying, but it doesn't reduce the term, so I'm locked in til next year!
If you have (for example) £200 per month to pay for 18mths and you want to pay £300 per month then your agreement can't continue for 18mths as you'll have paid it off after 12mths.
Does you agreement allow this ?
Ah, ok, so you need to only pay off enough so the remaining balance equates to 2p a month payment.