Interest on personal Loans -how is it calculated?

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Hi,

Myself and my partner have 2 personal loans -one with AIB and the other with BOI. My question is: if we decided to pay off these loans a year or two earlier than planned, do we save money in interest. ie. do you pay the same amount of interest regardless of how quickly we pay it back?

we could pay off the loans but are wondering if it is better to invest the money with a rate of 6.25%??

thanks,
 
Read the terms & conditions of the loans to check for what happens if you decide to repay them early.

If you are getting 6.25% on a regular saver account then bear in mind that you will not get this as the full return on all contributions that are drip fed over a period of months (e.g. you get 6.25% on the first monthly contribution, 11/12ths of this on the second etc.). Use this calculator to check what the actual returns will be.

Bear in mind that 6.25% gross CAR is 5% after DIRT. I doubt that you have a personal loan at 5% or less so chances are it may be better to clear the loans before worrying about saving.
 
If you have an ordinary term loan, the interest is calcualted on a daily basis, so the earlier you pay it off the better. There should not be any early repayment penalties.

If it's a lease or HP, then it would be more complicated.

Brendan
 
Newbie pay off the loan as early as possible as the interest in real terms will be more than double what you would get from a savings account. If you are familiar with Eddy Hobbs then you should be familar with what are "real terms". If not let me know and I will try to illustrate.
 
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