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What is a loan overpayment and what are the benefits?

What is a loan overpayment and what are the benefits?

Secured Loans > Our Loans > Homeowner Loans > What is a loan overpayment and what are the benefits

What is a loan overpayment and what are the benefits?

A loan overpayment is when your pay extra towards your loan over and above your agreed monthly repayment.

The two main benefits of loan overpayment are:

  • It helps you clear your debt sooner
  • It may help reduce the amount of interest you are charged over the term of the loan.

Most lenders allow you to overpay on your loan, although some may impose limits, penalties or extra charges.

With unsecured loans taken out after February 2011, you can make extra payments of up to £8,000 within 12 months without penalty.

This is also the case with some secured loans – but not all. Be sure to check your contract to see what your lender allows before you make any overpayments.

  • Loan overpayments can reduce the overall cost of your loan and clear the balance sooner.
  • You will still need to make your usual monthly payments
  • Remember to check your loan agreement that there are no fees for overpayment


Overpayments can either be made as a one-off lump sum or by regular payments throughout the year.

You may choose to overpay your loan if your financial situation changes. For example, you may have more money available each month than when you took out the loan.

Loan overpayments can be made on secured loans, such as mortgages, depending on what the lender allows.

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Warning: Late payment can cause you serious money problems. For help, go to moneyhelper.org.uk

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