Interest on early repayment of Funding Circle Busines Loan

RomfordNavy

About to take out a Funding Circle loan but reading contradictory advice from them about whether interest is actually reduced on a Business Loan if additional repayments are made early?

Funding Circle FAQ (https://www.fundingcircle.com/uk/support/business-loans/ ) quotes:

Can I make overpayments on my loan?

If your loan has a term of up to 12 months (referred to in your contract as a ‘Flexible Loan’), interest accrues only on the remaining balance. So, when you overpay, you’ll shorten your loan term and reduce the total interest paid. This means you could pay off your loan faster.

If you make overpayments on a loan with a longer term of 24 months or more (referred to in your contract as a ‘Funding Circle Business Loan’), your overpayments will reduce your future repayment amounts but not affect the outstanding loan term. You’ll pay less over the same number of fixed repayments.

The second paragraph here suggests that paying earlier than the repayment schedule would not reduce the overall interest paid.

Any thoughts?

Nomunnofun1

RomfordNavy said:

About to take out a Funding Circle loan but reading contradictory advice from them about whether interest is actually reduced on a Business Loan if additional repayments are made early?

Funding Circle FAQ (https://www.fundingcircle.com/uk/support/business-loans/ ) quotes:

Can I make overpayments on my loan?

If your loan has a term of up to 12 months (referred to in your contract as a ‘Flexible Loan’), interest accrues only on the remaining balance. So, when you overpay, you’ll shorten your loan term and reduce the total interest paid. This means you could pay off your loan faster.

If you make overpayments on a loan with a longer term of 24 months or more (referred to in your contract as a ‘Funding Circle Business Loan’), your overpayments will reduce your future repayment amounts but not affect the outstanding loan term. You’ll pay less over the same number of fixed repayments.

The second paragraph here suggests that paying earlier than the repayment schedule would not reduce the overall interest paid.

Any thoughts?

It doesn’t suggest that at all. It states that it will not affect the loan TERM - as in the length of time required to clear the balance. 

RomfordNavy

Nomunnofun1 said:

It doesn’t suggest that at all. It states that it will not affect the loan TERM - as in the length of time required to clear the balance. 

If monthly payments are increased from the scheduled amount then surely that will lead to lower overall interest and logically the loan will then be paid off earlier would it not?