Tip to reduce the cost of your personal loans

Tip to reduce the cost of your personal loans

If you can’t repay an unsecured personal loan in full you should be allowed to make extra payments to help pay off the loan sooner and so reduce the overall cost. With unsecured loans taken out after 1 February 2011, you can make extra payments of up to £8,000 in a 12-month period without penalty. For extra payments of over £8,000 the maximum penalty is 1% or 0.5% on the entire amount repaid.

For example, if you paid back £9,000-1,000 over the limit, the most you could be charged would be £90.

Make sure you tell your lender first, However, unless the lender specifically allows it in the contract, you can’t simply overpay without warning. You must give them notice that you’re making an overpayment. Then you must make the overpayment within 28 days of that notice, although you can send the payment with the notice if you prefer.

 

If you do send payment without notice, the lender can treat the payment as received 28 days later (so you’ll pay interest up to that point).
 
This allows them a period to calculate how much is owing
For unsecured loans taken out before 1 February 2011, and any other loans, you usually aren’t allowed to make partial overpayments.

 

personal-loans
But you can repay in full at any time (and in part if that is allowed for under the contract).
You could check the terms and conditions, however, to see what exclusions apply to overpayments.
Claim back payment protection insurance
 
Many lenders have been selling payment protection insurance premium alongside loans and credit cards. You may not have been aware of it or be able to make a claim on it.

It might easily have cost you hundreds of pounds and if this policy was mis-sold you are entitled to your money back.

Source : moneyadviceservice

 

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