Your Right to Settle Early
Under the Consumer Credit Act 1974, you have the right to settle a personal loan early at any time — in full or in part. The lender cannot refuse, and they must provide you with a settlement figure within 28 days of your request. This is one of the strongest consumer protections in UK credit law, yet many borrowers don't know it exists and continue paying interest they could have avoided.
The settlement amount is the outstanding capital plus any interest accrued up to the settlement date, minus a rebate for the interest you would have paid over the remaining term. Under FCA rules, the rebate is calculated using a formula that may include a small deduction (the lender can keep up to 1 month's interest or 28 days' interest, depending on the loan type). This calculator includes a conservative estimate of this charge.
When Settlement Makes Sense
- You come into cash (a bonus, inheritance, or tax refund) and want to clear expensive debt.
- Your loan has a high APR (above 15%) and more than 12 months remaining.
- You're consolidating into a cheaper loan and want to close the old account.
- You want the peace of mind of being debt-free.
When It Might Not Be Worth It
If only a few months remain, the early repayment charge may eat into the savings. If your loan has a very low APR (below 5%), you may earn more by keeping the money in savings. And if settling would leave you without an emergency fund, you're better off keeping the cash and continuing to make payments.
Related Tools
- Personal Loan Calculator — see the full loan breakdown.
- Loan Comparison — compare offers before you borrow.
- Debt Consolidation — combine multiple debts.
Disclaimer: Finance Atlas is not regulated by the FCA. Estimates only, not financial advice. Always consult a qualified, FCA-regulated adviser.