possible to pay off Hire Purchase Early without penalty?

[daveknott5]

Hi All, just wondered, is it possible to pay off a Hire Purchase agreement early without penalty? Thinking of trading up to a Boxster S, would be looking to fund about £8k on hire purchase, but don't want to be tied in to a long term payment period.

Anybody know the answer?

[Snowboy]

It depends on the agreement.

Most reputable banks offer personal loans that you can pay off early or overpay.
Most will do daily interest calculations too, so you won't get stung.

Some car finance offer you the ability to overpay or pay off early – but some frontload the interest so don’t save anything (or they did, this may be illegal now).
Also, some of the moe 'budget' banks and loan companies may frontload all or some of the interest.

Some allow you to overpay until the payment is down to £50 a month – but not pay it all off until the end of the agreement… although I think that was PCP rather than a loan.

So – it depends on the exact wording of the agreement.
You will be able to find something you can pay off early if you look around.

[DanielC4GP]

Isn't there something where if you've paid off 50% or more of your agreement you can give the car back to the finance company. Don't know the exact details but people have talked about it before on here.

[matc]

Yes you can pay off a HP agrement early, and due to new laws you can also pay lump sums throughout the agreement.

If you do settle early you may pay 1/2 months interest as a charge, but that should be it.

[lazyitus]

DanielC4GP said:

Isn't there something where if you've paid off 50% or more of your agreement you can give the car back to the finance company. Don't know the exact details but people have talked about it before on here.

Yes. 50% of the total amount payable, as long as it's a regulated document which will be the case if the agreement is in a private individuals name.

Regulated agreements now offer the 'right to withdraw'. If you inform the finance company that you no longer wish to have the agreement within 14 days of signing it, you then get 30 days to pay them back. The only cost will be the interest from the amount of days between signing it and informing them you wish to withdraw.

These two examples are long and short term options, respectively.

OP: Depends how soon you are looking to settle it off really. Standard regulated HP agreements are not front end loaded so you should see a rebate of interest at any point of settlement.