Car loan settlement - Settle just before a payment or after

[moonigan]

I collect a new car next week (Wed/Thurs) so the existing loan needs to be settled which I had planned to happen when the new car is collected as the old car is being taken in exchange. However I am due to make a payment on the existing loan on Monday so I am wondering if its worth settling the agreement before the next payment is taken into account or to wait until after its cleared. My thoughts are if I make a payment on Monday then part of that will be immediately allocated towards the interest payment for that month so I will be paying a couple of hundred pounds for not settling the deal 3 days earlier.


Is this correct or do I have it the wrong way around?

Cheers
P

[6bop]

Won't make a massive difference. The early settlement figure will have been calculated prior to that payment. When you make the next payment, the early settlement figure reduces. Finance companies are able to charge x days future interest on settlement, and this is factored in to the calculation.
Personal loans tend to be "precompute" interest, so the amount you pay each month relates more to the overall interest over the term of the loan, and not the actual month.
In simple terms, the amount required to settle the loan will reduce after the payment by broadly thy payment amount (assuming you are some distance into the term already)