Early Settlement Help

Superhoopza

Hi,

I have a few questions around settling loans early. I understand if you request an early settlement figure, loan providers can charge up to 56 days interest. I have a couple of questions and please feel free to ask more to help understand them:

1) I've read somewhere that if you are within 12 months of your loan end date, that loan providers are only able to charge up to 1 months interest, is that true or a myth?

2) I've also read that you are better off paying almost the current balance and leaving a residual amount of a loan to be collected by your next repayment date, is that a way of negating the additional interest charges of 56 days/1 month. Is that also true or a myth? If this is true, I'd like to discuss further about this.

Many Thanks

Herzlos

I believe it's 59 days interest whenever you settle it, though I've no idea what happens if you settle within 59 days of the loan ending anyway.

I've certainly managed to dodge early settlement penalties before by almost settling and letting the next payment clear it, but that'll depend on how it's contracted.

In any case, early settlement is going to save you a lot of money even if you do need to pay the 59 days interest.

sourcrates

Check what it says on your credit agreement.

retiredbanker1

If your credit agreement allows fee free overpayments then find out what the o/s balance is - pay it manually then let the direct debit go through as normal. If the d/d takes you into 'credit' balance you will be refunded.

IMO Don't ask for a settlement figure as this will include the e/s fee.

Superhoopza

Ok so don't ask for settlement figures, just pay the balance. Then they should cancel the direct debits.

Superhoopza

sourcrates said:

Check what it says on your credit agreement.

I have, I just wondered if they were legal rules that superseded these agreements or if they were better ways of going about it allowing to not pay the 58 days interest.

Superhoopza

retiredbanker1 said:

If your credit agreement allows fee free overpayments then find out what the o/s balance is - pay it manually then let the direct debit go through as normal. If the d/d takes you into 'credit' balance you will be refunded.

IMO Don't ask for a settlement figure as this will include the e/s fee.

The quoting feature isn't working well but essentially, say the loan balance showing is £3000 and the monthly DD is 300, and estimated interest is £100, would you advise to pay £2,800. Do I need to contact them when the balance is zero or slightly in credit to close the account? I've checked my credit agreement and its not very clear:

8) Can you make extra loan payments?

You can make extra payments to your loan at any time. Any extra payments made on a non-working day, will be used to pay off what you owe us on the next working day. Extra payments:
• will not change or replace your fixed monthly repayments and you will still need to pay these on time every month;
• may change the number of repayments you have left and the amount of your final repayment;
• will be used to pay off any fees or charges that we have charged you before reducing the other amounts you owe us; and
• can be made by debit card if you call the number in the contact details box below. 

9) Can you repay your loan early?

You can pay off your loan in full at any time by giving us notice. You can do this by calling us or writing to us. Our telephone number and address are in the contact details box below. 
• You must pay the full amount you owe us, plus the interest you agreed to pay us for the remaining term of the loan. This means you must pay us the total amount of your remaining repayments under the agreement, less a rebate that we will apply.  
• This rebate is calculated in accordance with the Consumer Credit (Early Settlement) Regulations 2004.
• Because of the rebate we will only charge you up to 58 days’ worth of interest on the outstanding balance because we will calculate the settlement amount using a settlement date that is 58 days after the date of the settlement notice.
• We will tell you how much you will need to pay to settle your loan early. We will provide you with an early settlement quote that will be valid for 30 days.

I'm within the last 12 months of the loan repayment.

Superhoopza

Any thoughts?