It can be hard to find a top loan that lets you make overpayments, or doesn't penalise you for paying the whole lot off early. We dug around to find some more flexible loans for optimistic borrowers.
They lend you money, but they sure don't want it back! Many lenders with cheap personal loans allow you to take repayment holidays, because they get paid more interest. However, if you want flexibility the other way, it can be hard to find a competitive loan because lenders don't want you to pay it off early.
New loans can lawfully charge you up to two months' interest to pay off the loan early and most providers take advantage of this. Even fewer providers allow you to make lump-sum overpayments. However, I've done some digging to try to find the very best loans that allow early repayment and partial overpayments. These are the loans I found.
Northern Rock is the cheapest lender to fit the bill. The headline APR is just 5.7%. A three-year, £5,000 loan will cost you £151.11 a month, and the total amount repayable is £5,440. Bear in mind that 5.7% is the 'typical' rate, which means you could be offered a worse rate, or even declined should your credit rating not be up to scratch.
The next best is Eskimo Loans, whose loans are provided by Northern Rock. Its loans have a typical APR of 6.3%, so that £5,000 loan will cost £152.39 a month and £5,486.04 in total.
The next best is Virgin Money, with a typical APR of 6.9%. The £5,000 loan will cost you £153.68 a month and £5,532.48 in total. There are a few other providers offering the same rate that don't charge early repayment penalties, but not all of them allow overpayments. Virgin will allow just one lump-sum overpayment in a twelve-month period.
For those of you overpaying borrowers who don't like nasty, big financial companies, there are some interesting alternatives. Zopa is a borrowing and lending exchange, which means you can borrow from other people, rather than banks. At the time of writing, rates range from 4.9% to 10%. At 4.9%, a £5,000 loan over three years will cost £149.71 a month and £5,389.67 in total (including a fee of £25). Just like the loans above you can pay it off early without penalty and make overpayments.
Another ethical source of loans could be found in a credit union. These won't charge you for early repayment, although they may not allow you to make lump-sum overpayments.
> Compare personal loans through The Fool.