ethanrob

iTrader: (3)

Is there anyone here that knows the in's and out's of personal loan's and borrowing's ?

Basically,i requested a settlement figure on a personal loan i took out three years ago,i roughly calculated the amount i thought i would own to settle the loan.

anyway they gave me a figure over the phone to which i disagreed,so they said they would send me a payment record and breakdown through the post.

This i recieved today,and on inspection they have "front loaded" all the interest

I was under the impression the APR on any loan,morgage,finance deal etc was added anually on the amount still outstanding,this is not a "loan shark" type outlet niether,its one of our bigger banks

can anyone help me out here as according to them i still own 65% of the amount i borrowed,but ive only got 18 months left on the loan,and have paid 36 months already

cheers mark

The Snug Rhino

sounds like a standard unsecured personal loan.....rule of 78 applies (goggle it and get ready for a headache!)

rules are a bit different now but i think you'll find you are stuffed on a 3 yr old deal.

very different to a mortgage.


in their defense.............if they did it your way people would use personal loans like an unsecured overdraft chosing to end the loan companies profit on the deal any time they want despite signing up to a longer term contract.............no excuse i know but it explains why the bankers used that basis.

RLE

iTrader: (2)

A lot of companies add the interest to the loan. You never really notice until you come to settle and fail to get the rebate. Tw@ts!!!

Northern Rock and a few others calculate the interest annually. Looks like they've got you mate.

2000TLondon

Yep, when you take the loan, you are given a repayment figure, final figure, whatever, which will be the amount you borrowed + interest over the entire term, which when totalled will be the amount you need to repay. However, I would expect the bank to discount the total as you are offering to repay early, therefore reduce their risk.

This may sound stupid, but in this situation, if you missed a couple of payments, I am sure they would accept a negotiated figure to settle the loan and to show it as cleared on your credit file..........

Obviously if they won't play ball there is absolutely no point in repaying it early.

Jamo

iTrader: (23)

which bank mate?

have you still got your terms and conditions of the loan? if not you may be able to request a copy of the original documents (they may charge you a fee for this) it will be on there, and a lot of the big uk banks did this for many years, such as lloyds, halifax, natwest, rbs, bank of ireland etc.

also its worth remembering that some banks charge for settling the loan early, again hidden in the terms and conditions that no one ever reads, something along the lines of we reserve the right to charge upto 3 months worth of interest on the settlement of the loan to cover our costs of settlement.

hth

james

Richard_P

Loans are often front loaded. Thank bank don't want you ending it early and they design it as such.

Mortgages are front loaded as well just so you know. That's why it's often not worth swapping mortgage deals!

B9GLY

Natwest do this, say you take a loan over 60months and the monthly payments are £200, for the first payments you make you pay say £180 interest and £20 off the loan and then say by the 55 payment you pay the opposite £180 off the loan and £20 interest.

as stated above it is designed to stop you paying it off early! i know that tesco used to have the payments dixed and no penalty for paying the loan off early, eg a £200 payment/month would be £150 off the loan and £50 in interest all the way through the loan.

Drunken Bungle Whore

I got stung by that one too - but just the once - they don't exactly make it clear at the outset, and you'll find it all explained in the small print - though you may need to go out an buy a magnifying glass.

Next time I needed a loan that I knew I'd be in a position to pay off early I expained all to the bank (Nat West). I paid a slightly higher rate of interest and have no early settlement penalties.