Making extra payments on car finance?

brightside229 · 14 Jul 2011 at 12:55

Hi i have car finance with honda, and i am wanting to clear it off a little bit faster, is their anyway to make extra payments? and is their usualy any charges for this. I presume any extra payment i make will pay off the original sum and not the interest, if that makes sense? so then in turn reducing the overall lengh of term to pay it back, reducing interest, but monthly payments still the usual amount? I am at work so cant call honda until the weekend when im off!

Thanks for any help!

Duke · 14 Jul 2011 at 13:03

Unless someone here has the exactly the same deal, I think you can only read the agreement you signed for more info.

Vonhelmet · 14 Jul 2011 at 13:19

It'll depend on your specific agreement but in very general terms, there are usually early repayment charges on finance agreements.

[TW]Fox · 14 Jul 2011 at 13:39

If you took it out after February 2011 the law allows overpayment at any time and any fee, if charged, is small.

If you took it out earlier its likely the only thing you can do is clear it in full.

brightside229 · 14 Jul 2011 at 13:44

Took it out over a year ago, 3.5 year agreement, so i guess i dont qualify for the new rules! which sucks

and cant afford to pay it all off in one go for quite a while yet! how comes the new rules only effect new agreements and not all, seems very unfair!

neil3k · 14 Jul 2011 at 13:56

brightside229 said:
Took it out over a year ago, 3.5 year agreement, so i guess i dont qualify for the new rules! which sucks and cant afford to pay it all off in one go for quite a while yet! how comes the new rules only effect new agreements and not all, seems very unfair!

What did you expect ?

NExt time, save up first ?

Scrutinize · 14 Jul 2011 at 14:00

neil3k said:
What did you expect ?

NExt time, save up first ?

bit of tough love there

Mucky_Pup · 14 Jul 2011 at 14:03

Save up the extra money in a savings account, then eventually ask for a settlement figure, and pay it off an option?

alx · 14 Jul 2011 at 14:16

brightside229 said:
Took it out over a year ago, 3.5 year agreement, so i guess i dont qualify for the new rules! which sucks and cant afford to pay it all off in one go for quite a while yet! how comes the new rules only effect new agreements and not all, seems very unfair!

Whilst I don't agree with early repayment charges (and I'm glad these new rules have come in), you can't just change exisiting contracts based on new rules as it would cause all sorts of legal problems - it sucks but that's life

.

However, when you signed the finance agreement you had all the details in front of you, so you should have known what you signed up for....

brightside229 · 14 Jul 2011 at 15:40

I didnt have a problem with it when i signed up, dont now really would have just been nice to have been able to pay off more every now and again, but their is nothing stopping me getting a loan to pay off my remaining amount left on the car, minus what i have saved to pay off now.

For instance £3k left to pay now, £1k saved, £2k loan to pay difference i dont have, and then make payments to pay back the £2k faster? Does that sound like a good option?

And i did save up for quite a while for the deposit i paid for the car in the first place, around a year!

Maz · 14 Jul 2011 at 16:50

There is no point paying bits off as all you are doing is reducing the length of time, best bet is to save the money and when you have enough to clear it then pay it off in a lump, that way you will get a rebate of interest for anything that was outstanding for whatever period of time.

[TW]Fox · 14 Jul 2011 at 17:00

Maz said:
There is no point paying bits off as all you are doing is reducing the length of time,

This is not true for post Feb 11 agreements because:

a) If you make an overpayment on an agreement taken out post February 2011 you can select whether the overpayment reduces the term or reduces the monthly payment

b) The less you owe, the less interest you pay.

Morbius · 14 Jul 2011 at 17:01

Getting a loan to pay off a loan? I wouldn't recommend this.

Keep saving until you can afford to pay it off.

Vonhelmet · 14 Jul 2011 at 17:26

Morbius said:
Getting a loan to pay off a loan? I wouldn't recommend this.

Unless the rate or terms on the second loan are preferable.

Gibbo · 14 Jul 2011 at 17:57

nonhelmet said:
Unless the rate or terms on the second loan are preferable.

Agreed if first loan is say at 16% interest rate.

New loan you can get say an 8% fixed rate with the new rules, then yes its worth doing I'd say.

Anim · 14 Jul 2011 at 18:00

Honestly, easiest thing to do would be to phone them and ask. It's likely that Honda arent the finance company though so find out who is and ask them about single payments.

Uriel · 15 Jul 2011 at 09:18

Depends on your specific agreement. I used Honda finance when buying my old Fabia in 2003 to help with cash flow while I waited for funds to be released from savings. Paid off all £5k a week later at no penalty and no interest incurred whatsoever, as it was calculated monthly.