Quote:
Originally Posted by gangzoom
Legally they are only allowed to charge early payment penalty of 2 months if you try to clear the whole amount, not sure how it works in your case.
But your numbers are right, because your taking a larger loan, the interest rate drops, so you at getting £2k extra of loan for no extra interest.....But don't think of it as 'free' money.
You are still paying £3000 of interest in total for a £10,000 loan....that means your paying the bank nearly 1/3 of the total loan amount in interest.
Essentially it's like going into a shop taking a £10 bottle of wine and than giving the cashier £13, would you ever do that normally??.....Think of that way, and clear the debt ASAP!!!
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He's actually better off taking more money. Its 2600 of interest instead of about 3500. And if he can clear 2k early and reduce that interest he'll probably be down to about 2200 repayable.
Make sure you have read the small print before early repaying though. Not all loans work like mortgage style loans.