Car Finance - paying off early - any penalties?

GDB2222

Grey_Critic said:

Are the finance company prepared to accept overpayments as you propose. Yes you can pay a loan off early - they will give you a settlement figure for that but their business model is built on X number of payments and  that is what you agree when you take the loan. That is why it is called a finance AGREEMENT and is a LEGAL document, you are trying to change the terms and conditions after having signed it. 

They would be within their rights to refuse, cancel the agreement and require you to repay the loan in full

Look at what the OP is actually saying. He just wants to make sure the finance agreement caters for early payments, and that is precisely because he understands that he has to abide by it. 

Grey_Critic

The original loan agreement is a legal document and sets out the conditions - making ad-hoc payments cannot be accepted unless the agreement includes for such payments. I have never heard of such an agreement or if it is actually legal. There are rules that govern how the loans can be made. I understand what the OP is wanting to do but finance companies loaning money to purchase a car is one thing. What is being asked for is more like money lending which are governed by different regulations..

donalduck21

you Car finance can be a minefield, as it depends on whether you go for Hire purchase ( this is where you keep the car in the end) or PCP - Personal contract hire ( Which is over a set period with a set mileage, of which time you can return pay off remaining finance or change the vehicle. HP interest rate tend to be higher. HP & PCP are secured to the car. Or you could an unsecured personal loan.

But the answer to your question is 

Yes, you can generally make overpayments on both Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements to pay them off faster or reduce monthly costs, but PCP has a key difference: overpayments don't reduce the large final 

Balloon payment only the monthly ones. Overpaying HP can shorten the term or lower payments, while on PCP, it typically lowers monthly payments unless you're settling the whole loan. Always check with your lender for specific terms, as some might have limits or require you to contact them for large sums, and remember you'll get an interest rebate. 

Goudy

donalduck21 said:

But the answer to your question is 

Yes, you can generally make overpayments on both Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements to pay them off faster or reduce monthly costs, but PCP has a key difference: overpayments don't reduce the large final 

Balloon payment only the monthly ones. Overpaying HP can shorten the term or lower payments, while on PCP, it typically lowers monthly payments unless you're settling the whole loan. Always check with your lender for specific terms, as some might have limits or require you to contact them for large sums, and remember you'll get an interest rebate. 

Yes, that is generally correct with PCP.
Your overpayments count towards the monthly payments and not the GFV.

So in effect you can overpay the whole of the monthly payments portion, but still owe and pay interest on the GFV until it's due or settled.

seatbeltnoob

Grey_Critic said:

Are the finance company prepared to accept overpayments as you propose. Yes you can pay a loan off early - they will give you a settlement figure for that but their business model is built on X number of payments and  that is what you agree when you take the loan. That is why it is called a finance AGREEMENT and is a LEGAL document, you are trying to change the terms and conditions after having signed it. 

They would be within their rights to refuse, cancel the agreement and require you to repay the loan in full

what a dumb take. You have a legal right to overpay any loan under consumers rights act 1974

https://www.moneysavingexpert.com/loans/early-loan-repayments/

You can repay up to £8000 a year without penalties.

Never understood why some people will take the side of the establishment against the common man, and chat out of their backsides in the process. People who capitalise certain words like they are saying it loudly and enouncating the words in the mind as they are typing. 

Consumer rights are pretty rock solid. you cannt sign away your legal right in a contract as a layman. b2b contracts different matter. The lender will have to allow you to overpay without penalties. 

I suspect most early settelemt fee scenario that most borrowers deal with aren't small overpayments but as a result of selling off the car or insurance write off which requires everything to be repaid at once. 

GDB2222

seatbeltnoob said:

Grey_Critic said:

Are the finance company prepared to accept overpayments as you propose. Yes you can pay a loan off early - they will give you a settlement figure for that but their business model is built on X number of payments and  that is what you agree when you take the loan. That is why it is called a finance AGREEMENT and is a LEGAL document, you are trying to change the terms and conditions after having signed it. 

They would be within their rights to refuse, cancel the agreement and require you to repay the loan in full

what a dumb take. You have a legal right to overpay any loan under consumers rights act 1974

https://www.moneysavingexpert.com/loans/early-loan-repayments/

You can repay up to £8000 a year without penalties.

Never understood why some people will take the side of the establishment against the common man, and chat out of their backsides in the process. People who capitalise certain words like they are saying it loudly and enouncating the words in the mind as they are typing. 

Consumer rights are pretty rock solid. you cannt sign away your legal right in a contract as a layman. b2b contracts different matter. The lender will have to allow you to overpay without penalties. 

I suspect most early settelemt fee scenario that most borrowers deal with aren't small overpayments but as a result of selling off the car or insurance write off which requires everything to be repaid at once. 

That article you linked to says:

There are a few types of car finance, whether you can repay early will depend on which type you have and the agreement with your lender.


That’s what people here are saying, too. I really don’t understand why you are biting people’s heads off. 

seatbeltnoob

I have reasons to say that, they were talking in general terms about loans and finance and in general terms you can overpay. They said the contrary; with such authority like it's a fact and some quick research tells me it's actually contrary to what they said, law safeguards peoples right to overpay and finance cannot penalise up to a point. They spouted utter nonsense about lender will cancel the loan for overpaying and want all their money back. Bad advice like that needs to be called out. 

My experiences with loans is you can overpay without issues -I never had any dealings with car finance so wanted to ask others. They are talking like its going to be a big loss for a finance company to be repaid early its no issue with finance companies, they are in the money lending business, if you overpay and bring the debt down, the lender will just have their money earlier and they can recirculate it back to other borrowers. 

I found this article but using gemini I found loads more sources which say that overpayment is not an issue for loans as they are now protected in law. 

"certain types" of finances probably relates to the discussions just above. PCP vs HP etc.I am going for a HP. HP is a straightforward loan. PCP is a hybrid lease & loan.