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Yes. You can repay an ordinary UK unsecured personal loan covered by the Consumer Credit Act in full before its agreed end date. Ask your lender for a settlement statement showing the amount needed to close the loan, as MoneyHelper explains.
This guide does not cover mortgages, income-contingent student loans or car finance agreements such as hire purchase and personal contract purchase (PCP), which involve different repayment considerations.
Get a settlement quote before paying
Tell the lender when you intend to pay and ask for a written settlement quote showing the amount required after any interest rebate, including applicable interest and charges. Confirm when it expires, how your next instalment will be treated and what to do about your direct debit.
Requesting a quote does not commit you to settling, as Citizens Advice's guidance for England explains. Keep making the agreed repayments unless the lender confirms a change. If your payment date changes or the quote expires, check whether the figure needs updating.
Understand the loan figures
The balance shown in your account can differ from the amount needed to close the loan, so check what it includes.
- Principal still owed is the borrowed money you have not yet repaid, excluding interest.
- Remaining scheduled payments are everything you would pay from now to the agreed end of the loan, including the interest within those payments.
- The settlement quote is the amount the lender requires to clear the loan on the stated terms and date, after any interest rebate and including applicable charges.
HSBC explains how it recalculates interest on early settlement and calls a reduction in the interest originally included a rebate. Some lenders charge an early repayment fee, so check your agreement and ask for any charges to be included in the settlement quote.
Lender terms vary. Novuna, for example, says it charges no penalty fee for early settlement but may include up to 58 days' interest in the settlement figure. Ask for a breakdown if the interest or charges are unclear.
Worked example: compare the payment totals
In this fictional example, 24 monthly payments of £240 remain, and no instalment is collected separately during settlement.
| Item | Amount |
|---|---|
| Remaining scheduled payments: 24 × £240 | £5,760 |
| Settlement quote, including £60 of interest and charges | £5,200 |
| Reduction in total loan payments | £560 |
For your own comparison, use the same starting date for both totals and include any different final instalment in the scheduled payments. Adjust the settlement total for payments or charges due separately and confirmed refunds not already reflected in the quote.
TSB's loan FAQs explain that a monthly payment due shortly after closure may still be collected and then refunded. Keep enough cash available until the refund arrives.
Check the cash left for bills
Suppose the same borrower has £7,000 in accessible savings and £900 of upcoming bills. Paying the £5,200 settlement leaves £1,800 in the account, of which £900 remains unallocated after setting aside the bill money.
How much cash you need for unexpected costs depends on your circumstances. MoneyHelper's guidance on debt and savings recommends considering access to emergency money alongside borrowing costs and repayment penalties. Weigh the reduction in loan payments against the savings interest you would give up and the cost of borrowing again if settlement leaves you short.
If you are struggling with essential bills or required repayments, speak to your lender and seek free debt guidance before committing cash to an extra payment.
If a partial repayment fits better
Check with your lender what a partial repayment would change, as Citizens Advice recommends. Ask how a specific extra payment would affect the remaining term, monthly payments and total interest, and whether there is a charge.
Vardon's loan calculator can estimate the effect of regular overpayments. It excludes lender fees and early repayment charges, and you still need a lender settlement quote to clear the loan.
Keep a record of the payment date and amount, along with the lender's confirmation and any revised repayment schedule. Check subsequent statements against the arrangement your lender confirmed.
