Is This Loan Fair?

cubel

Hi, everyone. A friend of mine borrowed £20K from LloydsTSB in 2006 for a term of 5 years. He has been honoring the terms and making repayment in time. But there's something I don't really understand. The loan he's got is called Fixed Amount Loan, which means he has to pay all the interests whether he pays it off earlier or not. And he also has to pay interests for the insurance for this loan, which altogether works out as over £9K something as total interests. Is this fair really? Is there anything he could do to help him out? Any advice is welcome.

CLAPTON

Why do you say that all the interest has to be paid even if he ends the loan early... this is most unlikely to the the case for an unsecured loan.

Why did he take out insurance on the loan?... he may be able to reclaim the insurance on the grounds of mis-selling.

cubel

CLAPTON wrote: »

Why do you say that all the interest has to be paid even if he ends the loan early... this is most unlikely to the the case for an unsecured loan.

Why did he take out insurance on the loan?... he may be able to reclaim the insurance on the grounds of mis-selling.

Hi, there. Thanks for your quick reply. When taking this loan, my friend asked for nothing but the lowest interest rate, he was offered 6.5% something. Hence he has to pay all the interests even when he wants to pay it off earlier. That is pure mis-selling, I reckon. He's found himself totally trapped right now. If he would like do something, like reclaiming the insurance, to whom should he turn? Cheers.

ILW

It sounds fron the OPs post as if the borrower was offered various options and decided on what they thought was best for them at the time. Cannot see what there is to complain about.

PROLIANT

Tell your friend to stop whining and clear the loan, bet he/she wasn’t complaining when they were blowing the loan money on whatever they borrowed it for!
6.5% is very low, an agreement was signed and he/she was happy at the time, what has changed since?

cubel

ILW wrote: »

It sounds fron the OPs post as if the borrower was offered various options and decided on what they thought was best for them at the time. Cannot see what there is to complain about.

thanks for your reply, my friend. my friend was not offered several options. he did ask whether he could pay off the loan earlier when he could afford. he was told that he could, but nothing was told about the "fixed amount of interests".

marshallka

If your friend has been missold the insurance on the loan then feel free to post on the PPI reclaiming thread with your reasons and someone can perhaps give you some advice there.
http://forums.moneysavingexpert.com/forumdisplay.html?f=169

There are lots of reasons for this misselling. If you take a look here

http://www.moneysavingexpert.com/reclaim/ppi-loan-insurance

it may help in your decision.

cubel

marshallka wrote: »

If your friend has been missold the insurance on the loan then feel free to post on the PPI reclaiming thread with your reasons and someone .............

it may help in your decision.

thanks for your reply. that's very informative resources. cheers.

CLAPTON

cubel wrote: »

Hi, there. Thanks for your quick reply. When taking this loan, my friend asked for nothing but the lowest interest rate, he was offered 6.5% something. Hence he has to pay all the interests even when he wants to pay it off earlier. That is pure mis-selling, I reckon. He's found himself totally trapped right now. If he would like do something, like reclaiming the insurance, to whom should he turn? Cheers.

can you quote the precise words in his contract that say this? it's most unusual and I've never heard of it.

~Brock~

CLAPTON wrote: »

can you quote the precise words in his contract that say this? it's most unusual and I've never heard of it.

It sounds like there is an assumption that the whole amount is payable simply because there is a total amount payable shown on the face of a fixed sum loan agreement.

In reality, an early settlement will include a rebate of interest, based on the unexpired term, calculated using the prevailing methods. This is the case with all regulated loans of a fixed interest rate - especially those issued by high street banks.

Perhaps this has been overlooked by the OP in the rush to assume that it has been, in some way, mis-sold?

jonesMUFCforever

A LTSB personal loan does not pre load interest but up to a couple of months ago did charge interest on the PPI premium.
It is very unlikely that OP can better the 6.5% they are on now (+ 2 months early settlement fee) but if they wanted to do so there would be no refund of interest as it is charged daily.