# Loan - Paying off Very Early?



## robertdon777 (Nov 3, 2005)

Hopefully someone will have had the same happen.

A friend at work (really isn't me - wish it was!) has borrowed 10K for a car from a bank (personal loan).

He has only had the loan under a month, was over a 48 month term. He has now come into some money and wants to pay the car off in full. Any ideas if you can do this and what kind of charges are involved.

Cheers

Rob


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## Rob_Quads (Jul 17, 2006)

All comes down to the t & cs

Watch out for funnies. I had the same where I had a loan for an extension but was then able to pay it off early so...

If I paid off the whole loan in full I incurred a fee
If I paid off 99% of the loan and let the loan close by the next normal DD payment (albeit a small one) then i paid no fees!

Madness but its the way it worked.


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## robertdon777 (Nov 3, 2005)

What bank was that with?


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## Rob_Quads (Jul 17, 2006)

hmm. Nationwide I think


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## RP84 (Sep 3, 2007)

As above. Tell him to pay a large chunk of the loan off with a one of payment. And then the rest will come out over a few direct debits


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## Ravinder (Jul 24, 2009)

Yeah, can pay off loan in full each time. Usually get charged 58 days of interest when settling the loan.


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## zsdom (Aug 30, 2011)

Early settlements of loans leaves a mark on your credit file, whilst not necessarily a bad mark you will get questioned as to why it was settled early by any creditor you apply with.
Some may even see it as a sign of financial difficulties and wanteing to get out before it causes you issues down the line


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## Rob_Quads (Jul 17, 2006)

zsdom said:


> Early settlements of loans leaves a mark on your credit file, whilst not necessarily a bad mark you will get questioned as to why it was settled early by any creditor you apply with.
> Some may even see it as a sign of financial difficulties and wanteing to get out before it causes you issues down the line


While it does mark as Settled on your credit file I would highly doubt this would go against you.

Are you basing your comments on experience?


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## Shiny (Apr 23, 2007)

Didn't they change the laws recently so you can pay lump sums or even pay off the whole loan without penalty?


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## Shiny (Apr 23, 2007)

Edit - it was the right to make overpayments to reduce the loan - http://www.bis.gov.uk/assets/biscor...072-consumer-credit-directive-quick-guide.pdf


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## Avanti (Jan 17, 2006)

robertdon777 said:


> Hopefully someone will have had the same happen.
> 
> A friend at work (really isn't me - wish it was!) has borrowed 10K for a car from a bank (personal loan).
> 
> ...


When I got my MK4 Golf I borrowed £10k from Barclays, and found I didn't need it, paid it back and there was no interest or charges.


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## zsdom (Aug 30, 2011)

Rob_Quads said:


> While it does mark as Settled on your credit file I would highly doubt this would go against you.
> 
> Are you basing your comments on experience?


Yes, I work in debt recovery & was told this by an experian representative.

But as said it more than likely wont go against you but some may take it as a sign of problems down the line


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## Johnnyopolis (Oct 25, 2005)

zsdom said:


> Yes, I work in debt recovery & was told this by an experian representative.
> 
> But as said it more than likely wont go against you but some may take it as a sign of problems down the line


So if you borrow £15,000 and pay it off early cos you have worked hard, that shows as a sign of you having financial problems?

Thats just plain odd in my book.!

If someone borrowed money off me and offered to pay it back early I would be saying cheers and buying them a drink not saying.. Ohhhhhhh so you got financial problems have you??? (but thanks for the money )


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## Ravinder (Jul 24, 2009)

It's nonsense. It won't have any detrimental affect.


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## rds1985 (Mar 7, 2009)

I work in debt management and the Mrs for the FSA in and have a bit of knowledge on these things. There is only a possibly detrimental effect if you pay a reduced settlement figure, this is because it indicates you haven't paid back in line with your initial credit contract / agreement-normally associated with the banks cutting there losses on someone In huge arrears, So long as you pay the credit off as outlined in the credit agreement Ts and Cs no negative effect.


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## jimmy669966 (Sep 25, 2011)

Johnnyopolis said:


> So if you borrow £15,000 and pay it off early cos you have worked hard, that shows as a sign of you having financial problems?
> 
> Thats just plain odd in my book.!
> 
> If someone borrowed money off me and offered to pay it back early I would be saying cheers and buying them a drink not saying.. Ohhhhhhh so you got financial problems have you??? (but thanks for the money )


The other side of the coin is you borrow £15,000 buy a car, but soon after realise you can't actually afford the monthly payments so sell the car and pay the bank back. Whilst this won't negatively effect your national credit rating it may cause the bank to remove any other lending for a set period of time.

Obviously finishing a 5 year loan in 3 years for example, is a different kettle of fish.


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## tonz (Sep 21, 2008)

I worked in the finance industry for a few years , and there was one occasion we refused a loan , the customer had paid several loans back early ( within weeks ) and we had to come to the conclusion there was a possibility of money laundering . So the loan was refused , like I said he had repaid several early , sure other lenders would of looked at him the same way.


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## robertdon777 (Nov 3, 2005)

tonz said:


> I worked in the finance industry for a few years , and there was one occasion we refused a loan , the customer had paid several loans back early ( within weeks ) and we had to come to the conclusion there was a possibility of money laundering . So the loan was refused , like I said he had repaid several early , sure other lenders would of looked at him the same way.


I don't think he's money laundering, his Mrs does all his washing for him

Well I'll let everyone know the outcome, he should be paying it back in about a month.


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## robertdon777 (Nov 3, 2005)

He's paid the money back now. They gave him 14 days to pay back without interest charges but charged him £1.30 per day for the service of the loan (paperwork I guess). He paid back on day 11 so way charged: £14.30 Total

That was with Santander


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## DaveyB (Oct 16, 2011)

I work in the Financial Services industry so this caught my attention. Couple of pointers worthy of note regarding the red tape around these kind of loans:

Loans for cars tend to be 'Structured' - having a fixed rate of interest payable over the term of the loan and a fixed repayment structure. They are generally high risk as there is often no collateral to back up the loan, this is why strutured loans are more expensive than unstructured loans such as mortgages. 
There is virtually always going to be an early exit fee as the long term structure of the loan and subsequent interest payments is the banks reward for taking the risk on you, they would much rather you stick to the agreed schedule as it is worth more to them.


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## Tricky Red (Mar 3, 2007)

Structured and unstructured; same as secured / unsecured then?


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## DaveyB (Oct 16, 2011)

Tricky Red said:


> Structured and unstructured; same as secured / unsecured then?


As far as I am aware, seems to be the same thing in principle :thumb:


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