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    • DaveyMames
    • By DaveyMames 12th May 19, 8:16 AM
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    DaveyMames
    Loan Early Settlement - Interest Refund?
    • #1
    • 12th May 19, 8:16 AM
    Loan Early Settlement - Interest Refund? 12th May 19 at 8:16 AM
    I heard that you get an interest refund for paying back a loan in full early. Can anyone explain what this is all about or how you work out how much you get paid back?

    Here's an example Tesco Unsecured loan (you CAN do an early settlement at any time but you'll be charged 2 months interest):

    Unsecured Loan Amount: 35,000
    Length of Loan: 120 months
    Monthly Payment: 533.56
    Interest Rate: 13.52% per annum (nominal)
    APR: 14.4%
    Total amount of interest Due: 29,027
    Total to Pay Back over 120 months: 64,027

    Let's say I want to pay back the whole loan after 18 months where I've already paid back 9,604 over that time. Do I simply deduct that value from the amount I was loaned (35,0000)? If so that would be 25,396 I would have to pay back.

    I used a calculator here: financecalcs.co.uk/Calcs/Settlement.php
    It said I would owe 32,952.12 if I wanted to pay off the loan early. Is that correct and would I get any of the interest I already paid refunded? I asked the loan provider and they said they couldn't tell me in advance how much I would have to pay back for an early settlement as it would be worked out at the time which isn't very helpful to me.
    Last edited by DaveyMames; 12-05-2019 at 8:26 AM.
Page 1
    • Browntoa
    • By Browntoa 12th May 19, 8:18 AM
    • 35,033 Posts
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    Browntoa
    • #2
    • 12th May 19, 8:18 AM
    • #2
    • 12th May 19, 8:18 AM
    Depends on your loan agreement , it may not allow early settlement , or have a minimum redemption
    I'm the Board Guide of the Referrers ,Telephones, Pensions , Shop Don't drop ,over 50's , Boost your income and Discount Code boards which means I volunteer to help get your forum questions answered and keep the forum runnning smoothly .However, please remember, board guides don't read every post. If you spot an inappropriate or illegal post please report it to forumteam@moneysavingexpert.com Any views are mine and not the official line of MoneySavingExpert.
    • DaveyMames
    • By DaveyMames 12th May 19, 8:27 AM
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    DaveyMames
    • #3
    • 12th May 19, 8:27 AM
    • #3
    • 12th May 19, 8:27 AM
    It's with Tesco. They said you can indeed do an early settlement at any time but you'll be charged 2 months interest. Just wondering if I'd get any of the interest back that I paid?
    • BoGoF
    • By BoGoF 12th May 19, 8:53 AM
    • 4,521 Posts
    • 4,099 Thanks
    BoGoF
    • #4
    • 12th May 19, 8:53 AM
    • #4
    • 12th May 19, 8:53 AM
    You don't get a rebate of interest already paid.....it's not a 'rebate' as such it is a reduction in the interest going forward to recognise the fact you have paid early. Request a settlement figure.
    • DaveyMames
    • By DaveyMames 12th May 19, 8:57 AM
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    DaveyMames
    • #5
    • 12th May 19, 8:57 AM
    • #5
    • 12th May 19, 8:57 AM
    Makes sense. Any estimate as to how much I would have to pay back to settle the loan?

    I haven't taken the loan out yet. I was just curious about how much I would have to pay back if I settled the loan early.
    • Browntoa
    • By Browntoa 12th May 19, 9:01 AM
    • 35,033 Posts
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    Browntoa
    • #6
    • 12th May 19, 9:01 AM
    • #6
    • 12th May 19, 9:01 AM
    The balance plus 2 months interest , as the terms say
    I'm the Board Guide of the Referrers ,Telephones, Pensions , Shop Don't drop ,over 50's , Boost your income and Discount Code boards which means I volunteer to help get your forum questions answered and keep the forum runnning smoothly .However, please remember, board guides don't read every post. If you spot an inappropriate or illegal post please report it to forumteam@moneysavingexpert.com Any views are mine and not the official line of MoneySavingExpert.
    • DaveyMames
    • By DaveyMames 12th May 19, 9:05 AM
    • 4 Posts
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    DaveyMames
    • #7
    • 12th May 19, 9:05 AM
    • #7
    • 12th May 19, 9:05 AM
    So if I've already paid back 9,604. Do I simply deduct that value from the amount I was loaned (35,0000)? So would I have to pay back 25,396 + 2 months interest?
    • AnotherJoe
    • By AnotherJoe 12th May 19, 9:14 AM
    • 14,588 Posts
    • 17,409 Thanks
    AnotherJoe
    • #8
    • 12th May 19, 9:14 AM
    • #8
    • 12th May 19, 9:14 AM
    So if I've already paid back 9,604. Do I simply deduct that value from the amount I was loaned (35,0000)? So would I have to pay back 25,396 + 2 months interest?
    Originally posted by DaveyMames

    Yes. Assuming by "paid back 9,604" you mean that's what you've calculated you've paid off after seeing your balance is 25,396.
    If you mean you've paid 9,604, then some of that will be interest and so you'll actually owe more than 25,396
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • BoGoF
    • By BoGoF 12th May 19, 9:15 AM
    • 4,521 Posts
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    BoGoF
    • #9
    • 12th May 19, 9:15 AM
    • #9
    • 12th May 19, 9:15 AM
    If you have the loan on online banking it should show your balance.
    • Jami74
    • By Jami74 12th May 19, 9:24 AM
    • 297 Posts
    • 264 Thanks
    Jami74
    I heard that you get an interest refund for paying back a loan in full early. Can anyone explain what this is all about or how you work out how much you get paid back?

    Here's an example Tesco Unsecured loan (you CAN do an early settlement at any time but you'll be charged 2 months interest):

    Unsecured Loan Amount: 35,000
    Length of Loan: 120 months
    Monthly Payment: 533.56
    Interest Rate: 13.52% per annum (nominal)
    APR: 14.4%
    Total amount of interest Due: 29,027
    Total to Pay Back over 120 months: 64,027

    Let's say I want to pay back the whole loan after 18 months where I've already paid back 9,604 over that time. Do I simply deduct that value from the amount I was loaned (35,0000)? If so that would be 25,396 I would have to pay back.

    I used a calculator here: financecalcs.co.uk/Calcs/Settlement.php
    It said I would owe 32,952.12 if I wanted to pay off the loan early. Is that correct and would I get any of the interest I already paid refunded? I asked the loan provider and they said they couldn't tell me in advance how much I would have to pay back for an early settlement as it would be worked out at the time which isn't very helpful to me.
    Originally posted by DaveyMames
    If you pay it off over the 120 months as per your loan agreement then the total amount of interest you pay is about 29,000 (your figures).

    If after 18 months you make a final payment, which would be about 33,000 (your figures) plus 2 months interest on that amount which would be probably be just under 1000, then overall the amount of interest you'll have paid on the loan would be about 8,000.

    This is an interest saving of about 21,000. You can't claim that interest back as a refund because you haven't paid it yet, but it is a sort of refund because you had signed an agreement to pay 29,000 in interest and if you'll only pay about 8,000.

    I guess if on day 1 of the loan you had paid the 29,000 interest up front and was now only paying off the actual loan, then they'd have to give you the interest you'd already paid back.

    Get the repayment figure. Even if you can't pay the full amount off pay off as much as you can as soon as you can because interest is calculated per day on the full balance, so even if you ended up still owing a little bit the savings would be astronomical.
    Mature student 2011-2016
    Professional
    • foxy-stoat
    • By foxy-stoat 13th May 19, 11:10 AM
    • 4,364 Posts
    • 2,558 Thanks
    foxy-stoat
    So if I've already paid back 9,604. Do I simply deduct that value from the amount I was loaned (35,0000)? So would I have to pay back 25,396 + 2 months interest?
    Originally posted by DaveyMames
    If you mean you have made 9,604 in the monthly payments then no....

    The approximate interest for the first few months is 420 per month so the 533 a month you will pay only pays off 113 of the sum borrowed.

    If you haven't taken the loan out yet then don't, what are you going to spend the money on?....the interest is a killer.
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