Smile Loan Settlement Problems

tolip

Hello

I took out a Smile loan for 12k in July 2006, repayment over 36 months.

The loan agreement shows the APR is 6.510%

Monthly repayments were 367.44

Last week I asked Smile for a settlement, the loan balance online was 2370 but today smile have given me a settlement of 2769.35

They charge interest every six months to the account in arrears, last interest was applied on 5 jan 2009, so I am failing to see how they arrive at their figure.

Calling Smile is a waste of time, you cannot speak to the settlement department, all communication is through their online messaging system.

I have earlier today transfered the settlement figure they provided me with to clear the loan, but I am thinking there is an error in their calculation, but dont know how to go about checking !

Also should I be concerned that they have been charging interest at 6.61% but the loan agreement shows 6.51%?

Comments and advice appreciated

Thanks

Robert_Sterling_3

The settlement figure should be calculated in accordance with the Consumer Credit Act.

You cannot just look at the outstanding balance and pay that.

There is a penalty for your "breach of contract" in terminating the loan before the maturity date in July 2009.

The earlier you terminate the bigger the penalty.

tolip

what about the interest?

Loan Agreement says 6.51% and paper work received say 6.61%

nomoneytoday

tolip wrote: »

what about the interest?

Loan Agreement says 6.51% and paper work received say 6.61%

They should change it for you, but in reality a 10bps difference won't make a huge difference to the payments

Robert_Sterling_3

I agree that the interest rate you were being charged was 6.61% when corrected to 2 decimal places. It has been rounded up to 6.61% from a very very slightly lower number.

An APR can not be lower than the interest rate you are charged. So the APR is not 6.51.%

Rafter

tolip,

Something funny has gone on here and you should write and complain.

Looks like you have been charged £25 more interest over the life of the loan if the APR is wrong on their system versus your paperwork.

The settlement number looks odd IF your numbers and dates are right and you are up to date with payments.

Unless the loan has some wierd penalty clauses then I can't see how you can owe them £2769 unless they have missed your last payment.

I suggest you write disputing the APR and their settlement number and requesting a breakdown of the settlement figure showing what you have paid and any penalty applied.

R.

Robert_Sterling_3

The interest rate charged is acuarially correct.
i.e. It is the right figure ( corrected to 2 decimal places ) which is needed to pay off the loan in 36 installments as stated.

The APR might be the same as the interest rate charged or higher than the interest rate charged. It is not the interest rate which is applied to the loan.

The only thing that is wrong is that the stated APR is incorrect. This fact has not cost the borrower any money.
The borrower could inform the lender that the APR given by them was incorrect and see where that leads.

Without reading the terms and conditions of the loan I cannot say what the penalty is for "breach of contract" but my guess is that it is two months interest on the outstanding balance of the loan.
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Summary.

The borrower, in my opinion, has been fairly treated moneywise, in accordance with the Consumer Credit Act, except in as much as the APR shown is inaccurate.