Personal Loan Settlement?

moonboots89

I'm going to pay off a personal loan next month. Apparently when you request an early settlement the final figure will include up to two months interest on top which will be based on the currently outstanding amount when you request the settlement figure.

Maybe I'm being daft, but why bother asking for an early settlement at all? Couldn't I just pay the full balance as a standard overpayment - then the loan would finish anyway without the extra interest? Or couldn't I pay it down to £1 and then request the early settlement so that the extra interest will be based on just the remaining £1? 

I'm clearly missing something obvious here! Has anyone paid off a personal loan before? If so how did you do it?

moonboots89

Oh dammit sorry, can a kind mod please move this to the loans board? Thanks!

MSE_ForumTeam5

Moved as requested

Phoenix72

You need to read your loan t&c's to see how overpayments would be dealt with.

moonboots89

Phoenix72 said:

You need to read your loan t&c's to see how overpayments would be dealt with.

Thanks. There aren't any other fees so reading around it sounds like I should overpay it so that there is just one months worth of debt remaining and let it clear naturally the following month.

PS for anyone in a similar position, my understanding is that its probably only worth doing a formal settlement if there are other fees involved that you want to avoid e.g. fees for partial repayments.

Superhoopza

moonboots89 said:

Phoenix72 said:

You need to read your loan t&c's to see how overpayments would be dealt with.

Thanks. There aren't any other fees so reading around it sounds like I should overpay it so that there is just one months worth of debt remaining and let it clear naturally the following month.

PS for anyone in a similar position, my understanding is that its probably only worth doing a formal settlement if there are other fees involved that you want to avoid e.g. fees for partial repayments.

moonboots89 did this work? I.e making a large overpayment for most of/all your balance and then requesting settlement on the final £1 or few £? 

moonboots89

Superhoopza said:

moonboots89 said:

Phoenix72 said:

You need to read your loan t&c's to see how overpayments would be dealt with.

Thanks. There aren't any other fees so reading around it sounds like I should overpay it so that there is just one months worth of debt remaining and let it clear naturally the following month.

PS for anyone in a similar position, my understanding is that its probably only worth doing a formal settlement if there are other fees involved that you want to avoid e.g. fees for partial repayments.

moonboots89 did this work? I.e making a large overpayment for most of/all your balance and then requesting settlement on the final £1 or few £? 

Hi. Yes it worked for me. I ended up doing it slightly differently to what I said in my post though - I paid it all the way down to zero and then requested a settlement (rather than leaving just one months payment remaining). I did this with a Halifax loan and a Sainsbury's loan. When I requested a settlement with Halifax I just paid the remaining ~£15 of interest for that month and the loan was closed. Sainsbury's were a bit awkward, at first they said I couldn't get a settlement because the balance was zero and they would take my next direct debit anyway (?!) but then I got a call from their payments team who said the loan was closed and I wouldn't even have to pay that months interest. The lady on the phone said that I'd 'found a loophole' but they wouldn't quibble about it. I think most people pay the settlement fees so they were a bit confused.

So I guess you're experience will vary depending on the lender, but it looks like it's worth a try. Personally I saved about £250 in settlement fees.