Bamboo loan- front loaded interest

Amylf333 · 2 March 2018 at 11:47AM

Hi

Hoping somebody might be able to offer some advice!
I tooo out a high APR Loan for £3500 with Bamboo in May 17. I pay approx. £200 a month so in all I've paid about £1600 I think. I contacted them for a settlement figure, expecting it to be about £2500. However, they quoted £3461! When I asked them why so high, they explained interest is front loaded and that this was explained in agreement I signed.

I went away and studied all forms signed an no where does it state this. When I phoned back, a different advisor told me it wasn't stated in terms and conditions and they were under no obligation to do so.

I asked them to give me a breakdown of what Ida actually paid off the loan and what I'd paid off interest and as you can imagine I've only paid about £180 off actual £3500 of borrowed!

Just wondering about legality of this? I'm guessing they can get away with it but seems so unfair, especially concerned I wasn't aware. Seems like a trap to keep you paying high interest loans which were only
Option at time.

Thanks in advance!

[Deleted User] · 2 March 2018 at 11:48AM

The interest wasn't front loaded.

Interest is simply higher in the early stages as the balance is higher.

It's not a trap - it's just interest.

Amylf333 · 2 March 2018 at 12:04PM

Thank you.

I have just read other posts and found link to online calculator which showed how it works.

Amylf333 · 2 March 2018 at 12:06PM

Also, can I ask do all loans work in this way? I suppose I thought the same amount of interest and principal amount was paid each month. I was surprised at how little principal I'd paid when they told me the breakdown. It doesn't seem fair but I guess that's because such high APR and on a lower rate it wouldn't be so obvious?

[Deleted User] · 2 March 2018 at 12:16PM

All loans work that way.

If you paid the same amount of principal each month, then your loan payments would be massive in the beginning, and therefore unaffordable.

The way interest is calculated is fair, as you only pay interest on the amount you borrow, for as long as you borrow it. The quicker you pay off, the less you pay.

Otherwise you would have slow payers being subsidised by those who pay off quickly.

ChuckMountain · 2 March 2018 at 1:04PM

The figures seem a little bit low based on their own calculator, but since you haven't given the term or the APR of the loan then its hard to work out.

As an example if you got their representative 49.7% APR on a 30 month term which equates to £205 a month. Then you would expect the settlement to be around the £3,000 mark.

The total amount payable would be £6,177 so if it was fully front loaded, which they don't do now, and as you stated you have paid £1,600 so it would be around the £4,577 mark that the balance would be. So you are getting a refund of interest for the remaining period.

It would suggest you have a higher interest rate and longer term that the representative one. Applying a higher interest rate and longer term gets much closer to the figures you have been quoted.

Bamboo loan- front loaded interest

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