Paid off part of Credit Union loan early - Interest Question

[RJD]

Hi all,

I have about 12000 remaining on a Credit Union loan. I pay it by standing order so the repayments are very regular.

I paid off around €1700 today as an extra to the usual repayments thinking it'd be best to get rid of the loan asap.

I noticed that only around €1650 went off the loan though, that they took €50 in interest.

Can anyone tell me why they took the €50 when it was an extra lump sum repayment?

 

[Crugers]

Interest is calculated daily so if your last payment was 1 or 2 or 3 days ago then there would be 1, 2 or 3 days interest due.
The €50 was the interest due on the principal since your last payment.
The interest due at your next regular repayment will be less (1) because you have paid interest on the balance to date and (2) the balance outstanding is less due to the lump sum paid.
At your next regular payment more of it will go off the principal and less on interest.
Most CU systems are set up to deduct interest due first.
They could possibly override the default if it was specifically requested.
Or next time make the lump sum payment on the same day as your regular payment (when the interest is up to date).

 

[RJD]

That makes perfect sense. Thanks!

My usual standing order should have hit over easter and although it left my account, it hasnt hit the CU account yet. That would explain the interest I paid today.

Thanks a lot!