An overpayment is any payment a business makes towards a facility that is more than the amount due under the schedule. It is a way of paying down the balance faster than the agreed plan.
What an overpayment can do
Because interest accrues on the outstanding balance, reducing that balance sooner can reduce the interest your company accrues over the rest of the term. Whether and how overpayments are allowed is set by your agreement.
- It reduces the outstanding balance ahead of schedule.
- It can lower the interest accrued over the remaining term.
- Any rules around overpayments are in your agreement.
Things to check first
Before overpaying, confirm how the lender will apply the extra amount, for example whether it shortens the term or reduces future payments. Check too whether any early-settlement amount applies if you intend to clear the facility entirely.
Credicorp lends only to UK limited companies and LLPs for business purposes. We do not state amounts here; how overpayments work on your facility is set out in your own terms. Credicorp is an exempt business lender, so the Financial Ombudsman Service and FSCS do not apply. Ask our team before making a large overpayment.
See also: What is a repayment schedule?, What is a credit limit?, What is amortisation?.