MegaSack DRAW - This year's winner is user - rgwb
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I took out a loan for £4000 just over a year ago when the credit crunch was biting. I couldn't get a really low interest rate even from banks I'd used before (One of which I'd had 3 loans with and paid them all off no problem) so I went to my bank (NatWest) and the money was in my account in 48 hours. Sorted, but I'll end up paying a bit more interest back.
Just after I took out the loan my job looked a bit shaky, but it's now OK until mid 2010 at least. The loan is due to pe paid off mid 2011, so I started paying off an extra £20 a week by standing order 2-3 months ago to try and get it paid off a year early, just in case. No problem there, I can see the loan account on my internet banking, and the debt is dropping rapidly
So yesterday I get a letter from NW saying that they are dropping my normal monthly payment by a few quid so I'll still not pay it off until May 2011. Hmmmm.
So before I ring them, a couple of questions
If I just up my SO to take account of this drop, it'll still pay off early, won't it?
Can I insist the normal payment stays the same?
How much are they going to cop a strop over this?
You agree the final payment cost at the time you take the loan out.
If you start paying back more per month they lose out on interest.
Maybe go and talk with them and agree a new repayment taking the interest into account?
Frequently there are charges involved in paying your loan off early, because they arent "earning" the expected amount from the interest. If they get arsey put the extra you´d be paying off into a separate account and then pay the whole lot off in one lump sum when you have it.
How Im reading this- NatWest are eeking out more interest out of you as they have clocked your trying to pay off early?
NatWest are eeking out more interest out of you as they have clocked your trying to pay off early?
Yep, spot on.
Maybe go and talk with them and agree a new repayment taking the interest into account?
I've thought about that too, yes.
I'll ask if there's any penalty for early repayment, but I've paid loans off early before with no problem,
bit late now but I have used [url= http://uk.zopa.com/ZopaWeb/ ]Zopa[/url] and they allow overpayments with no penalty
Natwest had a clause of 1months interest for early repayment on a loan I had with them a few years back. My student overdraft 'earned' them over 1k in interest and income protection payments. 🙁
The thing is, like I said, I can see the loan on my internet banking. It's just like a normal account - They debit interest once a month, and all the payments are credits. Since I've been doing this, the interest debit had dropped noticeably!
EDIT
Natwest had a clause of 1months interest for early repayment
I can live with that. It'll be about £40.
🙂
"My student overdraft .... income protection payments"
why take out income protection insurance if you're a student?
Peter - check your original agreement if you still have it - most will define what happens if you make overpayments. You may find it better to put the extra ina nother account until such time as you have the money to pay off the remainign loan plus any interest penalty. As has been said - talk to the bank - they may not be happy but they shoudl tell you what your options are.
What is to stop you carrying on paying your extra in to pay off the loan early, then deliberately leaving say £5 owing for the last year?
Or how about you just pay it off early. There will more than likely be penalties, but it will still be cheaper to pay it off early.
Why don't you open a high (ha) interest savings account with the bonus money you're trying to pay off (which counteracts the monthly interest), so basically when the time comes your allowed to pay it off, you have the right amount of money with some interest on it, so you hardly loose out, you just have to play by your banks rules.
Check with the FSA but I am sure that they outlawed front loading of interest on unsecured loans. They can charge you an early settlement fee but it won't be anything like the full amount of the interest over the original term of the loan. Usually two or three months interest is the amount charged.