Best course of action for paying off the rest of this Loan

Chocolatefund

Good day, MSE

Hoping to get some opinions on what to do next.

I took out a Te$co Loan of £20,000 (£23,959 including interest) @5.2% over 7 years. Monthly direct debit is £285.

I let the loan payments run their course for about a year.  Then earlier this year I had my financial light bulb moment and started overpaying so I could clear it quickly.  The last few months I’ve been overpaying £1000+ each month.  Each overpayment gave me an interest rebate adjustment of £200-300 thereabouts.

I sent an overpayment last month of £1200.  I did not receive any interest rebate adjustment this time…

Im wondering if it’s because what’s left of the ‘interest’ part is now baked into my remaining direct debits.  If I’m no longer going to receive any interest rebate adjustments for overpaying, I’m wondering if I should do one of the following;

1) Keep going with the monthly overpayments (not expecting the adjustments) and let the last direct debit go through normally to avoid the ERC.

2) Put the £1000 plus instead into a decent savings account, build up some interest over the next year, then pay a big £10k plus chunk off, and let the last remaining one/two direct debits go through. 

3) Option 2, but instead request a settlement figure one I’ve built up enough savings.  That would come with 2 months worth of interest for paying off early, but still might be better mathematically.

My total amount outstanding is currently £13,082.  I’m aiming to have this cleared next year as my 2025 goal, so any advice on which is best mathematically to save interest would be much appreciated.  

Brie

I don't understand what you mean by receiving interest rebates.  I didn't think that was how loans worked.  I believed that the more you paid the less principle you have and therefore the less interest you could be charged.  The more you pay earlier in the time you have the loan the less interest will accrue.  So no matter what they said about the loan being £23,959 including interest that only applies if you follow their payment schedule.  

As for putting money into a savings account instead of overpaying that will only work in your favour if the savings account gives you better compound interest than the loan is charging.  So higher than 5.2%.

Chocolatefund

Perhaps interest ‘refund’ makes more sense?

For example, one month I sent an overpayment of £1100, and got ‘Rebate Int Adj’ of £336.  That’s how it shows up on the app.