Penalty on early repayment of a variable loan?

I've a variable rate car loan with GE Money that I got through EBS that I want to pay off 15 months early: is it right that they are insisting on charging me the interest as well as the capital that I would have had to pay them for the next 15 months? I thought if you repaid a variable loan early then you only repay the outstanding capital amount?

Not only that, but they are also trying to charge me an extra 200 Euros for the difference between the interest rates when I took out the loan (2006) and now; however when quizzed on this and when I pointed out that interest rates are now lower than they were then he couldn't give me an answer. I'm waiting for their complaints department to revert but was wondering if anyone else has had any similar experience with this crowd?

1) Is it a car loan or is it a HP agreement? If it's a HP agreement, they are definitely right.

2)Check that it is a variable rate loan. Most car loans are actually fixed rate loans.

3) a lender can't charge a penalty for early repayment of a variable rate mortgage. But I don't think that applies to normal loans. Check the Consumer Credit Act - it's easy to read.

4) Get out the loan agreement and check that out in detail. See what that says.

5) Ask them for a written statement of the early redemption calculation. Don't take their word on the phone.

6) In theory, the EBS is a mutual and might make a represenation on your behalf.

7) Obviously, if they are charging you the interest up front, you should not pay off the loan. Put the money on deposit instead.

Thanks Brendan: it is a car loan and not a HP, but thinking about it afterwards I suspect the guy I spoke to hadn't a clue and completely mis-led me. Although it's a variable rate loan I've been paying the same repayment amount each month so I suspect the additional amount is actually made up of the interest variations since I took the loan out. I'll double-check when I receive their calculations though!

Many thanks.

I spoke to a guy in a bank and he told me the following:

1) The formula for calculating the final payment must be set out in your contract.

2) The formula will have been approved by the Financial Regulator.

I forgot to ask him if it could be a variable rate loan. In our conversation, he just assumed it to be a "flat rate" or fixed rate loan with a fixed monthly repayment.

The repayments are calculated so that most of the interest is actually paid up front. So paying it early does not usually generate much of a saving.