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Car Finance Expert Q&A

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Edwin Miles. Underwriting Manager

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Is car loan interest front loaded?

Hi, are the loans front loaded with interest or do you pay only for the time you have borrowed if paying back early? Thanks

Posted by gary donald on

Answer.

Hi Gary, a great question.

In response, most car finance lenders don't front load interest on hire purchase agreements (typical car finance). Front loading interest is mostly used for personal loans.

What you have to bear in mind though is that the amount you owe at the beginning of the agreement is greater so the lions share of your monthly payments will go towards paying the interest off. As the balance of the loan decreases so does the interest portion of your payments and you start paying more capital off the loan balance.

When an early settlement figure is calculated by the lender they do reserve the right to normally charge 2 months interest but you don't pay ALL of the interest on the agreement if you settle early.

For all those reading this, if you need car finance please make an application and if approved you can choose a car from any reputable dealer and we also provide a no obligation quote. Kind Regards, Edwin

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Posted by David on

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