Early repayment on Tesco Loan?

guitaruser

I'm about to take out aTesco Loan, there is a good chance I'd like to pay it off early as 5 years isa long time. On the illustration within the paperwork, it details what I would pay to do so. This does not take into account, the length of loan , ie I pay all the interest even if I pay it off within one year. I have just rang Tesco up and apparently there would be a rebate should I pay it off early. I'm confused as the paperwork says the opposite.

Can anyone shed any light onto this?

Also I'm taking the 2 month payment holiday, does that make any difference?

Thanks

CLAPTON

what does the paperwork actually say... normally you would be given an illustration of what happens if you pay after 1/4 , 1/2, and 3/4 of the time.

obviously if you take a payment holiday the interest will still be charged and you will pay more overall.

guitaruser

CLAPTON wrote: »

what does the paperwork actually say... normally you would be given an illustration of what happens if you pay after 1/4 , 1/2, and 3/4 of the time.

obviously if you take a payment holiday the interest will still be charged and you will pay more overall.

Yeah it illustrates all those fractions, which for example after 1/2 of the time equates to £4,421.39. The total amount borrowed is £8,929.80 for £7,500.

Therefore according to the illustration you pay all the interest even when you pay it off in 2.5 years instead of 5.

I do realise the payment holiday adds to the overall cost yes, but my badly phrased question related to total interst payed with early repayments.

Thanks again

CLAPTON

No it doesn't say you pay all the interest if you terminate early.

if you give me the full figures I will be better placed to advise.

how much is the loan
what is the APR
how many payments are due
how many no payment months are there
and the illustrative examples

guitaruser

Hey Clapton

£7500
6.8%
62 payments of £148.83
2 months holiday at start of loan
Settle early amounts to pay
1/4 = £6,241.56
1/2 = £4,421.39
3/4 = £2,305.24

Thanks

CLAPTON

Basically the two payment free months add about £90 of interest to the loan before you start making payments.

Obviously at the beginning of the loan you owe the full amount so the interest you pay each month is high but as more of the capital is paid back the interest paid becomes less.


Its difficult to get these things exactly right but broadly speaking
after 1/4 of the period you have paid in total about
2220
of this about 660 is interest
and capital repaid is 1580

so you still owe 6088 in capital and they can charge you some two months interest.... so their figure while a little higher than my calculation is about right




So if you repay early you will get a reduction on the interest that you would have paid had you continued to the end of the loan.

guitaruser

Thanks again, so is a Tesco personal loan comparable to most other lenders in terms of early repayments?

CLAPTON

any 'normal' unsecured loan taken out since may 2005 is regulated by the CCA and so must work out the interest in accordance with their formula... basically it works just like a mortgage calculation... but they are allowed to add two months interest.
so such loans will give an early settlement interest rebate broadly along the same lines (note they are not regulated with regard to overpayments ).
so yes tesco are similar to most others

guitaruser

Clapton, you should be charcing for all this advice! Cheers

Mind you I thought you'd have been to busy being a guitar god to give out financial advice!