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Paying off a longer term loan early
This seems too easy and probably wont work but would love to hear some advice.
I'm looking to take out a personal loan with the bank and ideally would like it over 5yrs but my budget is £380p/m
£21k over 5yrs is £417, rate is 7.4% fixed.
£21k over 8yrs is £288, same rate 7.4%
Is there a way of working out how much I'd need to over pay each month so that I finish the 8yr loan in 5yrs?
I.e. £100 p/m equates to £6,000 I would have overpaid.
thank you
Comments
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MSE has one for mortgages, it might work for you:
https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/Sam Vimes' Boots Theory of Socioeconomic Unfairness:
People are rich because they spend less money. A poor man buys $10 boots that last a season or two before he's walking in wet shoes and has to buy another pair. A rich man buys $50 boots that are made better and give him 10 years of dry feet. The poor man has spent $100 over those 10 years and still has wet feet.
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If you want to repay £21k over 5 years then perhaps it's worth getting quotes from different banks0
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You would also need to look at the loan T&C's to see what it says about overpayments and how they will be treated.0
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As above you need to read the T&Cs over additional payments.The above rates are based on daily interest on the outstanding balance so to pay off the 8 year loan in 5 years you need to pay at the 5 year rate so an additional £417 - £288 = £129 pm. As you only have £92 pm spare that will pay the loan off in around 5y 8m
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