Butty

iTrader: (2)

I am looking at paying off the HP on my car two years early (out of five years) and have been given a settlement figure.
The settlement figure is 60% of the original credit. Does this sound right?
Is there a calculation that I can use to check it?

Nick

fast bloke

It is probably about right. 'Normal' HP has all the interest front loaded so if you borrowed 10k over 5 years at 7% they would add approx £2500.00 to the loan at the start. (This isn't quite accurate as they would use a decreasing compound calculation reflecting that at the end of each year you will owe a bit less.
This would make your payments £210.00 per month. After 2 years you would have paid £5000 of the £12500, leaving approx £7500 outstanding. If you decide to settle now they recalculate the interest you would have paid in the other 3 years (about £1200.00) and subtract that from the balance now. Leaves you owing £6200 of the £10k borrowed.

The amounts and interest rates may be different, but the calculation will come out the same IE - Approx 60%

Butty

iTrader: (2)

Thanks for the info.
I understand the scenario you show after just 2 years in a five year period, but I have now paid three years worth of payments.
I did the same thing on my last car where I borrowed £22500 (inc interest) and after three years I settled on £9200 (40% of original).

I think I am being stiffed on this latest settlement figure but I need to prove it.
Is there anywhere or anyone who can do a proper calculation for me?

Nick

fast bloke

Doh - Didn't read the question - Sorry

Check your loan agreement to see what it says about early repayment - You may be paying a penalty