Thought- one way to encourage people to pay off loan early is to show how much they would save in fees by doing so
I believe Monzo already do this for their loans. Or are you suggesting that Monzo should do this for external loan providers too?
Ah ok I didn’t see the feature, it just said the total paid, not amount of saved by paying off early
Does Monzo charge interest upfront on loans? Just from these pictures it’s not any cheaper, or it’s 0% but I didn’t think Monzo did that
I think it’s only cheaper if you pay the entire balance of the loan off.
Early repayments just seem to reduce the amount you need to repay each month, rather than reduce the period of the loan and therefore the amount of interest paid.
It is actually cheaper if you pay off a month early or pay an arbitrary amount off early too.
The images above are not totally accurate. When you pay off something early now, where it says “reduced by £100” actually says something along the lines of “you save £2.57 interest this month” and it shows a different amount for each month.
You save interest whenever you make any repayment - it isn’t a fixed term and the interest is calculated daily, not at the start of the loan.
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Hi so just to understand this…
If you pay off a loan early you will pay less in interest. So if you paid off a loan in day 10 days you would only pay 10 days of interest on that loan rather than 6 months?
You could cancel the loan within 14 days I believe. Do you really need the hard credit check for 6 years for a 10 day window?
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Oh that’s a good point. I’m more trying to work out if I should borrow on a loan which I’ll pay off in about 4 or 5 months or just put it on a credit card. I need to pay now though so don’t have time to take out an interest free credit card.
Put it on your current credit card and get a balance transfer one. There might be a small % fee for transferring though.
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Yes - that’s correct - you’d pay the interest for only the 10 days.
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So in which case why do people not take a higher amount of loan, at a lower interest rate, and then just pay back what they don’t need to get the lower interest rate?
Exactly what I did. Took the loan and paid back ÂŁ2000 the same day
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Does your app update to show less interest? I’ve just done this but my app is still showing the same interest. Or does it take a while to update?
Oh I’ve paid it off now so can’t check
But if you look at the settlement amount it shows that some interest has been taken off. That’s one thing I do remember
This is what you should see as the full amount including interest, from the main loan screen
This is what you should see when you look at the repayment of loan early
Oh that makes sense. Thank you!
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