Paying off loan early - Advice

[LosingGrip]

I think I know the answer to this, but want to double check.

I've currently got a loan with Tesco. It was for £10,000, paying back around £12,000. I got this in November/December 2015, so around half way. Monthly repayments are £213.

Some when in the near future, I'm going to be given some money. I have no idea how much or when (it was due to a crash, loss of earnings etc).

As much as I want to spend it on a new car, I need to be sensible.

The loan is manageable, but I would notice the extra £213.

I have two options. Either pay £X and shorten the loan length (still paying £213 a month) or lower the monthly repayments but keep the same length.

Does anyone have any advice on what would be best? I'm thinking shorten the length, mainly because I like the idea of being debt free sooner, but if it is better the other option then I'll look at that.

Thanks

[scottri]

You may get some interest back if you pay the loan off early. So i'd check with the bank and then aim to pay it off sooner rather than later. I just did the same with my bank and was pleased to learn i was owed nearly £800 back.

[T6 vanman]

fk me … what APR did you sign up for to be paying £2k in interest?

Generally the loan payback will be (made up figures for £213) £180 loan repayment & £33 interest, therefore you are unlikely to receive anything back but the repayment figure will be less that the £213 x months remaining

I don't think you will be easily able to reduce your monthly payments without another loan... therefore either pay off a lump sum and end the loan earlier (you'd pay less interest this way) or put the windfall into an account and standing order eg £100 per month into your current account to pay off the loan (but you'd pay more interest this way)

[clockworks]

I paid off a £10k Tesco loan last year. I made several lump sum payments by phone. Each time I called them, I was asked if I wanted to reduce the monthly payment or reduce the term. I opted to reduce the term, and was given the new final payment date and amount during the phone call.

My loan was for £10k over 5 years, interest was just over £800 (3%).

[Danm1les]

Keep the payment and reduce the term, its what I plan on doing.

Seems to be the most logical thing as you clear the debt quicker, and you currently manage the payment at the moment so may as well keep that the same.

[Smiljan]

T6 vanman said:

fk me … what APR did you sign up for to be paying £2k in interest?

Assuming 5 years, it's 7.4% isn't it?

[LosingGrip]

Thanks all . I shall reduce the term when I can .

The interest properly wasn't the best I could get, but at the time I needed it quickly and didn't have much time to be spent looking around.