Loan confusion, please help

littlun

In November 2004, we bought a house with a mortgage and, at the same time and with the same company, took out an unsecured personal loan of £25,000.

For the first two years, the (loan) rate was around 6% and then, after the two year fixed rate was up, it became 5% above base rate. The maximum interest rate over the past two years has been 13%.

I can't find the original paperwork or any statements (although they assure me there's one coming at the end of this year), but in November 06 we were paying £174.94/month at a rate of around 6%. We're currently paying £255.33/month at 12% (although this is about to come down).

I figure that at an average of £200/month for the past four years, we've paid approximately £9,600.

But according to the Building Society, the o/s figure on the loan is currently £23,950, i.e. a reduction - in four years - of just over £1,000!

Is there any way this can be right? Am I missing something vital?

When I queried it, the bank just said, "Well, there's the interest as well" and, yes, I know that, but I've had loans before and they still go down even with interest!

If anyone can shed any light on this, I'd be very relieved, because I'm feeling pretty worried, I must admit!

Kavanne

Did you take PPI with the loan?

CLAPTON

I'm afraid that if you borrow over a 25 years period you pay off very little capital in the early years
you really need to get a full statement of the account showing the full details.

GIOL_Elmo

Sorry but it sounds like it could be right, first thing to check did you take PPI, from the figures you gave it sounds possible?

However as you said it was 6% for first 2 years that means that somewhere in the region of £1500 a year in interest and you were paying £175 a month so roughly £125 interest and £50 capital balance. From this I would think you would have cleared about £1200-£1500 in the first 2 years, were there any upfront fees I would guess so on a product like this.

As advised above get a full statement and look over it and consider shifting it to another provider, if you move your mortgage would you get enough, from loan to value, to cover the secured and unsecured loans? If so I would consider doing this and remain paying a larger amount and with the lower rates it should make a large difference.

littlun

Thanks, everyone. Don't think we did take PPI, no, but I'll make sure.

consider shifting it to another provider, if you move your mortgage would you get enough, from loan to value, to cover the secured and unsecured loans? If so I would consider doing this and remain paying a larger amount and with the lower rates it should make a large difference.

I'm not sure right now. Would need to get a valuation. Would now be a good time to do this? In the current climate, I mean? Also, we have a DMP, so presumably that would affect it too.

Not to worry. I'll definitely sort it out at some point in the future when things are more stable.

Thanks again.