Paying lump sum of personal loan?

[spickles72]

I am looking to buy a car and will be financing it via a personal loan of about £18000 in the next month or so. I have a sharesave maturing in October for about £8000. My question is this. I would like to pay off a lumpsum of £8k on the loan in October and keep the term the same but reduce the monthly payments. Is this possible? I know that most lenders will allow you to pay lump sums in, but seem to want to keep the payment the same and reduce the term. Also would it be easier/cheaper to just take a new loan out in October paying off the old one (refinancing if you like). Not sure whats the best solution. Does anyone have any ideas?

[Sarnie]

Most will give you the option to either reduce the term or the payment. Most will actually prefer you to take the reduced payment as they will earn more interest out of you than if you reduced the term and kept the payment the same.

[NightRunner]

Depends where you are bankwise, some close off the old loan and open a new (smaller one) with a different rate/term/payment.

Be careful, one I had a while back paid me 10% of the interest back at the end as a bonus for paying on schedule...

[JB8]

It wouldn't make sense to take out a new loan and settle the current one, unless you could get a better interest rate.

Depending on the lender, the lump sum will either automatically reduce the term, or sit in credit, best thing to do is call them and make your intentions clear and ask for a partial early settlement when the time comes.

New rules came into effect in 2011 meaning lenders have to provide a partial early settlement as an option.

[anonymous-user]

Every loan is different, T&Cs.... Impossible to give an answer

[GreatGranny]

As above, imposible to tell unless you look at the T & C.

Mine is with nationwide and they will only reduce the term not the monthly payments.

[Big Worm 1]

When I had a loan with Barclays, they wouldn't let me pay a lump sum out of it unless it was enough to clear the remaining balance.