Bank Loan problem!!

LP79

Hoping someone can help or advise me on this.

I took out a bank loan with my own bank a couple of years ago. The amount was £15,000. My payments were £345 per month. Since I took it out, I've paid about £8,000 back since it started. My fiance and I were going to refinance the loan to help pay for our wedding next year seeing as I'd paid quite a large amount off it already. I called the bank for a settlement figure this afternoon and got a shock!

They're telling me that when I took out the loan, they added the interest onto it, plus the payment protection costs. It added up to about £28,000!!! They said with what I've paid so far, it's taken it down to about £22,000. Then the settlement figure is £14,400.

Can someone please tell me, how after 2 years of paying £345 a month, that I've literally only paid £600 from the loan?!?!?!?!!?

Kavanne

Because your payment protection premium was front loaded and you have paid interest on that too.

LP79

So you think I've basically been Screwed?

Kavanne

LP79 wrote: »

So you think I've basically been Screwed?

I don't know, do you? and why?

LP79

To be honest, maybe I've been too niaive but I thought I had taken out a loan, bvut if I paid it off early, I'd only be charged interest for the amount of time I had the loan outstanding. So as I've had it for 2 years, was kinda hoping I'd only be paying 2 years worth of interest onto the £15,000 loan.

Like I said, maybe I'm niaive. Could use some advice on whether this is the normal way a bank loan works or are banks trying to get more money out of us as usual?

Kavanne

you are only paying 2 years of interest plus maybe a small penalty, but your insurance premium sounds like it was huge.

LP79

I just couldn't understand how a loan of £15,000 goes to £28,000 before I've even made a payment! Thinking of taking it to citizen's advice.

MoneyWaster2007

On my loan which is with Halifax, the settlement figure is worked out based on the current outstanding balance, plus the months' interest x 1.5 (roughly). This figure does not take into account any overpayments which you may have made since taking out the loan.

As Kavvane rightly said, the interest is always front loaded. As you also have payment protection, then the £8k you have paid will have barely touched your outstanding balance.

I would advise ringing your bank up and asking them to send you a loan statement over say the last 12 months, so you can look in detail at how they are ripping you off. Out of that £345, you will be able to see the proportion that is simply interest and the proportion that is coming off the actual balance.

I would suggest overpaying on the loan as much as possible until you have cleared it completely, because the longer you are in debt, the more money you are losing. Its like watching sand fall through your fingers.

By the way, sorry if any of this post is a bit harsh, its not intended in that way, im just offering what i hope are some useful tips...good luck!!!

LP79

I know it's probably my own fault for being so niaive but I just feel like I'm being ripped off so badly when I'm paying so much back!

MoneyWaster2007

This doesnt seem right to me, I mean how the hell do they come up with a settlement figure of £28k when the loan was initially for £15k, its ludicrous. Even with your protection, this still seems way too high. What did the bank say when you rang them up about it?

LP79

The loan I asked for was £15,000. With interest and payment protection, it's up to £28,000. They said I've paid the £8,000 back, which brings it down to about £22,000. Then they said the settlement figure is £14,400.

I just don't get how a loan of £15,000, with almost 2 years of payments at £345 per month, can only bring my balance down by £600!!!!