Do I change my loan?

jeanchan

How on earth do I decide to change my veryexpensive loan from Nat west?I am new to the site and have just found out that the interest is 15.6%.Thats's just as expensive as my credit card.I am on benifit so was surprised they offered me a loan,now I know why.They say that if I pay it off now I will pay £2,577.59 .I borrowed £3,000 over 5 year's on the 1/9/04.Are they using the 78 rule?Do I switch,if I can or do I put it on a low rate card. Any help appreciated for a busy mum of 4 children.

Willsnarf1983

i have no clue but the experts will be along

welcome


Will

Catch_A_Fire

it won't be easy trying to get a new loan if you're on benefits (i assume you mean not in work too). if you can find a lender who isn't put of by this (ask them before you apply), ring your existing loan supplier and request a settlement figure (using ro78 it might be more than you are expecting) (also check how long this is valid for and be aware of when your repayments are due as this will affect the amount). apply for a loan to cover the settlement figure (choose who you apply to carefully - you don't want to collect searches on your credit file like). compare the final amount payable (capital + interest) of any offers you get with the outstanding repayments on your existing loan (not the settlement figure). Also don't be tempted to reduce your repayments by exending the term if you are comfortable with them now as you will end up paying more in the long run. also, don't do what the tv-ad companies want you to do (ie "i paid off my other debts and had enough for a holiday"), the more you borrow, the more you have to pay back!

Robert_Sterling_3

You do not give us enough info to analye the loan fully.
e.g. Monthly Payment ?
Is the interest figure given an APR or the actual rate charged on the loan.

However at first sight it looks as if your interest rate is horrendous but taking that into consideration the settlement figure looks OK.

With a five year loan at a high rate of interest you would expect the first year to be mainly interest and little capital repayment and the fifth year to be mainly capital repayment and relatively little interest.

Repayment Mortgages work like that too.

I dont think the rule of 78 is being applied but you could always ask the lender.

jeanchan

Dear Robert,
Thanks for the reply.I did'nt realise just how complicated loans are.I did'nt even ask what the interest was,but at that time I just thought it was amazing they would consider me .The bank sugested it on the phone as I was moving house.The repayments are £70.25 per calendar month,which I manage,but a reduction in interest should be possible if I knew how to do it.But how!

asandwhen

Ask natwest for a topup loan see if the intererst rate would be lower - you may end up with £500 more paying the same amount back - wouldn;t have thought anyone else would consider you given that you are on bennefits - worth a try though.

Robert_Sterling_3

I have analysed your loan using a spread sheet.
I can say that that the draconian Rule of 78 has not been used to calculate the redemption figure.
It is my opinion that this is a very reasonable settlement figure indeed.
THis may not be want you would like to hear but it is the case.