I bought a car about 2 years ago on finance. The car was priced at £11k and I was very quick to jump at the chance rather than thinking.

Over the 5 year period I'm paying over £18k in total, thats £7k interest, which is over half the value of the initial loan

The monthly payments are OK, its £300 per month, I'm not struggling with that since I still live at home and don't have many commitments. I'm seriously kicking myself paying such high interest when the exact same model can be bought outright for £4k now

If I try to payup early, will I pay less interest? Is there anything I can do or do I just have to grin and bear it?

  • depands, go and talk to the Citizens Advice Bureau, they are the expert on this sort of thing
    – Ian
    Commented Jan 29, 2010 at 21:36

2 Answers 2


It really depends on the terms of your loan. For example, some loans have a pre-payment penalty. You will just have to ask your lender to know for sure.

That said. In almost all cases, you can save considerable interest by making extra payments towards the principal. Be careful though, some lenders require you to specifically mark the payment to be applied to the loan principal and if you don't designate it as such, they will just apply it as an early payment for future months and not reduce your balance until that future payment is due, which doesn't help at all.

Another option to reduce your total interest costs, though more common for larger loans like mortgages, is to split the payment into multiple parts and pay more than once a month instead of a single payment each month. This only works if they calculate interest daily and would be useless if they do it monthly. They key is knowing the terms of your loan.

Despite it not being in their best interest (pun intended), most lenders will work with you on a strategy to help you minimize the interest cost in the name of customer service.

  • 1
    some car loans add ALL the interest as a charge at the start, so it really depends on the details of the loan.
    – Ian
    Commented Jan 29, 2010 at 21:38
  • I hate to be nitpicky, but on a finance website we should get this right: it's "principal" not "principle". Commented Jan 7, 2011 at 22:13
  • DJ - that's what the edit button is for. Fixed. Commented Aug 29, 2011 at 20:27

My husband made a similar car loan decision when he was younger and didn't have an established credit history / favourable credit rating. As a result, he ended up paying triple what the car was worth, because of the interest.

When we consolidated our finances, this ugly loan was first on our list of priorities to change, convert, eliminate, but unfortunately, in our case, the terms of the loan were such that only the lender benefited. There was no incentive to pay off the loan early, in fact, we would have to have paid all the future interest at once, without saving a penny.

So check the terms of your loan - hopefully you're better off than we were. In our case, the only upside we could figure was the lesson of "live and learn"!

  • I'm assuming, that if I continue to keep up my payments and complete the loan without any issues, that I'll have a pretty good credit rating then? Do you think this would help me in the future when applying for 90% mortgages(if they still exist)?
    – James
    Commented Jan 3, 2010 at 18:14

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