Top-Loaded loans? Where's my money!

soop2

I found out that on my loan which is 1 year through out of three, I've already paid most of the interest, giving me no incentive to pay it off early (well, I'd save £400).

This is outrageous! How can they make me pay the interest up front for three years, then not give me it back if the time on the interest is recalculated? they've done me out of about £1500!

soop2

I should clarify: I'm asking, can they actually do this?

CLAPTON

maybe if you provided full details then we could explain it to you

soop2

What more details do you require? I'm in the UK, the loan is from HSBC. The loan was for £4500, and the interest on that over 3 years was £2460. If I want to pay off the loan now, after 1 year, the interest I'll save will be £409.

This means I've already paid off £2051 of interest. My point is, if that's worked out over 3 years, surely it should be recalculated if I pay it off after 1 year?

But they're saying that if I want to pay it off, that won't happen.

CLAPTON

what was the APR?
what was the monthly payment
was PPI included
was there any payment free months
were there any missed payments

do you have a written settlement figure after 12 payments?.. how much?

soop2

what was the APR? I think 9.9% (I'll have to find out)
what was the monthly payment £156
was PPI included not sure
was there any payment free months nope
were there any missed payments nope

nomoneytoday

Most loans have a higher proportion of interest at the beginning, as the debt outstanding is higher.

If you request a settlement number some of this by be rebated on completion

Rafter

Repaying £4500 over 3 years with a payment of £156 per month is either an APR of 16% or you did pay for payment protection insurance.

In either case, the interest bill is a lot less than £2,460 - more like £1160 for either interest or insurance based on my numbers.

How can you possibly have paid £2,051 in interest when you have paid less than that in total payments?

They have done you out of nothing.... except perhaps a 1 month interest penalty for settling early which they are fully entitled to do legally.

R.

soop2

In either case, the interest bill is a lot less than £2,460 - more like £1160 for either interest or insurance based on my numbers.

How can you possibly have paid £2,051 in interest when you have paid less than that in total payments?

... good maths. I went into a branch, and that's what he told me. Ok, that makes sense. Well, I feel better about that in an odd way. There's not much sense in paying as much as I can off for £400 and the inconvinience of having no buffer.

As much as it is, I don't regret the cost; I was paying the minimum repayment on my credit card before, and it was barely making a dent.

Rafter

thanks - maths is my job

Glad you feel better about it - don't think you are being ripped off here and good move getting yourself debt free - and over a reasonably short period.

R.

CLAPTON

soop2 wrote: »

In either case, the interest bill is a lot less than £2,460 - more like £1160 for either interest or insurance based on my numbers.

How can you possibly have paid £2,051 in interest when you have paid less than that in total payments?

... good maths. I went into a branch, and that's what he told me. Ok, that makes sense. Well, I feel better about that in an odd way. There's not much sense in paying as much as I can off for £400 and the inconvinience of having no buffer.

As much as it is, I don't regret the cost; I was paying the minimum repayment on my credit card before, and it was barely making a dent.

I don't know your full circumstances so I may be wrong,
but it seems somewhat strange to say 400 isn't worth saving.
Remember too, you will have a extra 156 per month to save once the loan is paid off so you will pretty quickly rebuild a reasonably buffer.