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How to overpay a personal loan + save money

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Did you know you might be able to make overpayments on a personal loan?

I never thought about it until recently and was surprised that I can make overpayments on both my loans!  You too could save money by making extra payments on your loan.

I always knew you can settle a loan early and ask for a settlement amount which would deduct some interest, or that you can pay a chunk off, but I never realised you can make overpayments, even if small.

It’s really straightforward too.  We have just set up a faster payment for both our loans, so we can make overpayments whenever we like.

We started making overpayments on our personal Tesco loan in November 2019 and are saving ourselves some money in the process.

How to save money when overpaying a loan


There are two ways we are saving money on our Tesco loan when making overpayments.

Please note, these savings benefits apply to our loan as it was taken out after 11 June 2010.  If you took a loan out before this date then you will need to check your terms as you may not be able to overpay your loan or get the below benefits.

It’s always worth checking with your individual loan company and confirming.  We did this with both our loan companies, just to double check and be totally sure, before we started making overpayments.  

1.     Reducing our monthly payments

Rather than reduce the term of our loan with every overpayment, we are reducing the monthly payment itself.

Since the end of November we have overpaid around £400 and we have reduced our monthly loan payment by around £4 per month.

It’s not huge, but it all makes a difference.  Plus, it will continue to reduce the more overpayments we make.

The amount you’ll reduce your monthly payment by will depend on your loan amount, but as a guide, our loan has £6000 outstanding and five years left.

We now plan on overpaying every month, as much as we can, but if for any reason we couldn’t overpay and had a particularly tight month financially, it all helps to have every bill and outgoing as low as possible.

Reducing our bills to as low as possible is always beneficial.

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2.     Receiving interest rebates

The second benefit of overpaying has been to receive interest rebates!

For every £100 extra we pay off, we have received around a £10 interest rebate.

That’s less money we’ll have to pay back overall and it is reducing the outstanding balance of the loan every time we overpay.

When I first sent an overpayment we sent £20 just to make sure we’d set up the online banking details correctly and received almost £1 in an interest rebate.

It was only a pound, but it all adds up.  That’s a pound back in our pockets to spend on whatever we please instead of to a bank!

Even if you can only make small overpayments, it can be worth it if you want to reduce your outgoings and reduce your personal debt.


Our plan is to continue overpaying by at least £100 per month and preferably more in 2020.  Paying £100 extra per month will pay £1200 extra off our loan this year, on top of our normal monthly payments, will save us £120 in interest as well as reduce the monthly payments even more!

As Tesco say ‘every little helps’!


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