HSBC Personal loan settlement calculation help required please?

bored_of_debt

Hi, I have had a HSBC personal loan for over 3.5 years (4 year loan) and I am looking to settle this early.

I went to the bank to settle and they said that the early settlement figure is exactly the same as paying the entire duration (even when taking into account the 59 day penalty) - this must be wrong?

It looks as though the have front loaded the interest - but it doesn't mention this in the agreement... :rolleyes:

CLAPTON

not a lot of facts to go on but settling after 3.5 years of a 4 year deal should bring a small rebate but it would be modest.
what do the T&Cs say about early settlement?

bored_of_debt

CLAPTON wrote: »

not a lot of facts to go on but settling after 3.5 years of a 4 year deal should bring a small rebate but it would be modest.
what do the T&Cs say about early settlement?

I'll stick all the details up tomorrow moening when I get to work... Homehub is down at the moment. Thanks!

thriftymomma

By the time you get to only half a year left, the amount of interest you are paying on the sum has dropped to minimal.

bored_of_debt

Right here we go:

Loan amount £15,700.00
Interest £2,895.08
Total £18,595.08

Period 48 months

Payment 1 = £387.28
Payments 2 = 48 £387.40

HSBC Settlement Figures

After a quarter = £12,430.56
After half = £8,663.14
Three quarters = £4,499.70

There is a 59 day penalty deduction of interest for early settlement...

Interest rate per annum 8.9%, effective rate I will pay taking into account the timing of repayments, compounding of interest, monetary cost of interest charges. Calculated the same way as APR.


Total interest, at beginning of loan agreement HSBC work out the interest I will apply over the whole period and add to loan balance. HSBC calculate interest at rate 8.556% per annum (the simple rate) to the balance of my loan account as reduced by my scheduled payments.

Any ideas...? I have 4 payments remaining...

bored_of_debt

bored_of_debt wrote: »

Right here we go:

Loan amount £15,700.00
Interest £2,895.08
Total £18,595.08

Period 48 months

Payment 1 = £387.28
Payments 2 = 48 £387.40

HSBC Settlement Figures

After a quarter = £12,430.56
After half = £8,663.14
Three quarters = £4,499.70

There is a 59 day penalty deduction of interest for early settlement...

Interest rate per annum 8.9%, effective rate I will pay taking into account the timing of repayments, compounding of interest, monetary cost of interest charges. Calculated the same way as APR.


Total interest, at beginning of loan agreement HSBC work out the interest I will apply over the whole period and add to loan balance. HSBC calculate interest at rate 8.556% per annum (the simple rate) to the balance of my loan account as reduced by my scheduled payments.

Any ideas...? I have 4 payments remaining...

Rule of 78 :rolleyes:

lippylipps

hey all, i had a letter from HSBC asking me to offer them a settlement figure for my CC which has 970 owed. now im a single mother on benefits and have missed payments hence why they want to settle it and write off the rest.

the problem is i don't have a clue what to offer. any suggestions would be grateful and what you think would be a reasonable offer

bored_of_debt

lippylipps wrote: »

hey all, i had a letter from HSBC asking me to offer them a settlement figure for my CC which has 970 owed. now im a single mother on benefits and have missed payments hence why they want to settle it and write off the rest.

the problem is i don't have a clue what to offer. any suggestions would be grateful and what you think would be a reasonable offer

How much can you afford to pay??

CLAPTON

bored_of_debt wrote: »

Rule of 78 :rolleyes:

No, it isn't rule of 78 its the normal (fair) way of working it out... just like a mortgage you pay monthly interest based on the amount of loan outstanding at the beginning of the month.
After 44 payments you only owe 1522 so the monthly interest is only £11 so you can't expect much of a rebate. (i.e. 1522 x 8.56%/12)

bored_of_debt

CLAPTON wrote: »

No, it isn't rule of 78 its the normal )(fair) way of working it out... just like a mortgage you pay monthly interest based on the amount of loan outstanding at the beginning of the month.
After 44 payments you only owe 1522 so the monthly interest is only £11 so you can't expect mcuch of a rebate. (i.e. 1522 x 8.56%/12)

Any ideas why the settlement figure given to me by the HSBC 6 months from the end of the 4 year term agreement was no better than if i'd repaid the loan monthly until the end of the agreement?

jonesMUFCforever

bored_of_debt wrote: »

Any ideas why the settlement figure given to me by the HSBC 6 months from the end of the 4 year term agreement was no better than if i'd repaid the loan monthly until the end of the agreement?

Because the vast majority of interest charged has already been paid - as other posters have indicated.