Rebate of interest on early repayment of loan?

nrw

Hi all,

I have a Northern Rock loan, around 5k outstanding, to be paid off over next 2 years - when I took out the loan I seem to remember some small print about a rebate of interest if I paid off the loan early (of which there are no penalties).

I can afford to make some extra payments which should hopefully take a year of the payment schedule, does anybody know anything about this piece of legislation on interest and how I would go about requesting a rebate?

Thanks,
NRW

standupguy

The rebate will only become due if the account is settled early - this can be done at any time throughout the agreement when you can ask the lender for a settlement figure and you will be quoted the full balance due less a rebate of charges for early settlement.

From what you say you want to settle the account 12 months before the end of the agreement.
It depends on the total length of the agreement but because more interest is paid in the early stages of an agreement when there is more money outstanding, the amount of refund you will get 12 months before the end will not be much.

Paying extra per month reduces your balance but does not reduce the total interest you pay.

You may well be better putting the payments you were going to overpay into a tax free ISA savings account and letting your loan run its course?

sdooley

Well as one of 55 million involuntary lenders to Northern Rock can I thank you personally for assisting with clearing its debts!

nrw

Thanks Standupguy, I had thought about saving the over-payments instead, I just hate loans and wanted to clear it! Tis a good idea though.

Sdooley - np :O)