How much interest can my bank charge me?

spraggon2009

I had a bank loan for £6000 and in 2003 i was out of work and suffered financial difficulty. I thought at the time my bank was doing me a favour by transfering my loan to what they call a 'managed loan'. This meant they were able to reduce my payments from £150. I have been paying £100 per month on a balance of £6000 since October 2003 and the balance still remains at £2500. When i've looked at the breakdown of payments £49 of each £100 payment is being paid to interest! That means that i have another 5years of paying this loan back. I will by the time this loan is paid have paid almost £15000 back on £6000 borrowing? I would like to know if anyone knows if the bank can do this? I have asked them to transfer the loan back to an ordinary loan but they said they are unable to do this as during my financial difficulties in 2003 i lost my house so have a repossession on my credit file. I don't see how charging this much for my original borrowing has helped my financial situation at all and find i was given very poor advice by my bank.

Rafter

The bank spread your loan over a long period and presumably charged you a fairly hefty interest rate. I can't see anything illegal about what they have done.

Given your difficulties were 6 years ago it may be worth checking your credit file - if everything has now 'dropped off' you might be able to raise the £2500 you need to pay off your managed loan at a much lower rate. £2500 over 3 years at 12% apr should be about £82 per month.

I think you are over estimating the time it will take you to repay your loan. Over time the interest will reduce and the amount you will pay off will accellerate. However you seem to be paying an Annual interest rate of over 25% which seems very high, but it looks like you only have about 3 years to go.

Good luck.

R.