HSBC managed loan

sarahlouise1979

Hi, this is my first time posting- although i have been reading the forum for a while. I'm after some advice...

I've made offers of payment to all my creditors, all of which have been accepted- apart from those that I made to HSBC. I have a personal loan, overdraft and credit card with them. I offered to pay £50 a month towards the loan, £10 to the overdraft and £5 towards the credit card (all pro-rata amounts), toatlling £65 a month. They have written to offer me a managed loan instead.

I've read a lot of bad reports about these on here, but am thinking that the offer sounds pretty good... They've offered a loan of 1% over their base rate of 0.5%, making a current effective annual rate of 1.5%. They state that the monthly repayment would be £82.55 but as a concession to me, and 'without varying the terms of the loan agreement' they would be preapared to accept reduced monthly repayments of £65.

As long as i don't default, I can't understand how this is a bad deal???? Would love to hear other people's opinions please!

Tixy

If you check the APR you may find that it states the interest rate can be altered - so you could end up paying significantly more.

Also check exactly what 'balance' figures they are using for your debts. I believe they have been known to add on the interest you would have been charged under your old agreements before coming up with the starting managed loan figure so that you are in effect paying interest twice.

I'm sure others will have more advice

Georgie4

How long will it take for you to pay it off compared to if you keep things as they are ?

Is it a variable rate ? The base rate will not be this low by the end of the year so you could end up paying far more.

These are the main reasons they are generally a bad idea - not always but generally

sarahlouise1979

I've just had another look at the paperwork they sent me and the loan amount is £1300 less than what I owe them?????!!!! A few weeks ago I sent a 'claiming back bank charges' letter to them and I think I was asking for about this much to be refunded (need to check that). Do you think they've actually knocked that amount off what I owe them?

Tixy

That would be nice - lucky you if they have. But I've not read a case of them doing this - definately ask them for a breakdown of how they came to the figure. You don't want to find they have missed something off that you have to continue to pay.

sarahlouise1979

I've just called HSBC and the chap I spoke to said that the reason it is a lower amount is because i'd be repaying the original personal loan off early, so they've taken the interest off or something?? I didn't fully understand what he meant- but that's a hell of a lot off a loan that only had £5600 left to pay on it...

303

Hi there,

Not sure if you're the person that's just sent me a private message about this, but just in case you're not, I'll explain my situation.

My wife and I owed over £20k between us, spread across a personal loan, an overdraft and 2 credit cards with HSBC (plus smaller amounts with other banks). As you did, we wrote offers of pro-rata payments, which detailed our income/outgoings, and what we could offer them each month. After a few weeks we were offered a Managed Loan over a period of 10 years (ours was actually at an APR of 0% over base rate). After lots of umming and ahhing (and reading lots of horror stories online!), we decided to accept.

It was all sorted out within a few days. I don't think we were refunded any interest on our loan, but we were refunded the Payment Protection Insurance, so the settlement amount was a bit lower than we had been expecting.

And despite some people suggesting HSBC might apply 'stealth charges' when the loan was actually set up, the balance now showing next to our Managed Loan account in Internet Banking is exactly the amount specified in the initial letter and contract. So I would say that, considering most of the complaints that people seem to have about Managed Loans are based on their loans being top-loaded with excessive interest when the loan is first set up, and that not really being applicable here, and based on our experience so far, you should definitely consider the offer very carefully, as it does seem as though (however unlikely it may seem!) that HSBC are actually starting to offer some of their customers favourable terms as a means to managing their debts. And certainly in our case, if they hadn't offered us a deal worth accepting, they would now be looking at having to write off a large portion of the outstanding debt (if not the total amount) as the next option we were looking at would have been an IVA or Bankruptcy. With the Managed Loan they stand to recover the full amount, so it would seem that both parties will benefit.

CCCS_Sarah

Hello,

You would need to also ask HSBC for the total amount payable on the loan as this will give you a better idea.

With regards the online banking it would show the balance that was quoted but they calculate the interest very similar to an overdraft, so you will make a payment of so much and then just before your next payment the interest will be added back on.

303

CCCS_Sarah wrote: »

Hello,

You would need to also ask HSBC for the total amount payable on the loan as this will give you a better idea.

With regards the online banking it would show the balance that was quoted but they calculate the interest very similar to an overdraft, so you will make a payment of so much and then just before your next payment the interest will be added back on.

...the interest will be added back on? Can you explain that a little more, I don't understand - I thought interest applied to Managed Loans was "top loaded", which in my understanding means that the full amount of interest for the full term of the loan is applied at drawdown?

CCCS_Sarah

303 wrote: »

...the interest will be added back on? Can you explain that a little more, I don't understand - I thought interest applied to Managed Loans was "top loaded", which in my understanding means that the full amount of interest for the full term of the loan is applied at drawdown?

I would double check because the accounts I have come across HSBC add the interest on after the monthly payment has been made, therefore the term is a lot longer than initially thought.

This can be checked by asking HSBC the term and the total amount payable. HSBC can provide this information.

303

CCCS_Sarah wrote: »

This can be checked by asking HSBC the term and the total amount payable. HSBC can provide this information.

From memory (I spent that long examining the small print over and over, a lot of it is imprinted on my memory!), the total amount payable specified in the contract was the same figure that was drawn down (is that the correct term?) to our account, and the term specified was 10 years. We did the calculations and the monthly payments, as they stand, do add up to the total amount payable, when spread over 10 years. But I'll definitely be keeping tabs on things online (we have yet to make our first payment, so at the moment I can't see anything but the total balance) - still quite wary of what we've signed up to