Early Repayment?!?

00mrmark00

Hi there,

Long story short, need to apply for a loan to pay off a balloon at the end of a PCP deal.

I’m looking at a Abbey loan which states a 30 day interest repayment penalty which doesn’t seem too bad.

However, I’m wondering if I have done my sums right and whether I truly understand the way interest is calculated.

This was my plan…

1. Take £6500 over 4 years @ 8.9% APR

2. Pay off after approx 6 months. This is to enable us to sell the car and avoid the abysmal trade-in price offered by the dealer.

3. Pay off the balance of the loan less 3.5 YRS interests.

However, I’m not sure if I have this right.

Can anyone offer any advice?

[Deleted User]

Are you sure they will offer you £6.5k at 8.9%?

00mrmark00

Yep...

http://www.alliance-leicester.co.uk/loans/index.aspx?ct=primarynav

Got the offer in writing.

CLAPTON

well you will avoid 3 years and 5 months worth of interest as there is a one month interest penalty.

do bear in mind that you pay more interest in the early months as you owe more than you do in the latter months
but its a good deal.

00mrmark00

Thanks Clapton.

Could you help me work out the interest if I ran the loan for approx 12 months for example. The reason I ask, is that we might at that point gain access to some cash that would enable us to repay early.

The paperwork that has been sent through states that if we repay in the 1st quarter of the 48 month term, so 12 months. Then we would owe best part of £800. So I'm worried thats £800 of outstanding interest. As at £160 month repayment, we would still owe approx £5760 by my reckoning.

I called them, spoke to 2 diff departments but no one could answer the question.

Don't want to sign the paperwork, just incase I tie myself into a rotten deal I can't escape from.

I'll call them again tomorrow, hopefully I'll get someone who knows what they are talking about. But any advice would be greatfully received.

CLAPTON

8.9% APR is a reasonable deal

the early settlement figures are determined by law and they are allowed to add up to 2 months interest... your's seems to be saying they only add one month


the paperwork should tell you the repayment figures for 1/4, 1/2, and 3/4 of the term as examples
sometimes they give the actual give but sometime they give the figure per 1,000 borrowed.


what do you mean 800 after 12 months? 800 per 1000 borrowed or what?

00mrmark00

Hi Clapton,

The loan wording is as follows:

Amount payable on early settlement;

The examples below show what you would pay if you wanted to pay off the amounts you owe under the agreement early.

- if you paid off the amounts you owe when a quarter of the of the repayment period had passed you would pay £786.57

- half £546.38

- 3 quarters £284.82

What are these figure? Remaining interest or interest paid for that period. Ultimatley all I want to know is what will it cost me if I pay off early. I.e after 12 months. 36 months x £160 + a months interest. Or the later plus the £786.57???

Many thanks.

CLAPTON

they are the setlement figure per 1000 borrowed


so at 1/4 of the agreement you actually pay 6,500/1000 x 786.57 i.e £5,112 as the settlement figure.


very reasonable

00mrmark00

Hi Clapton. Apologies for the delayed response, had to go away with work.

Many thanks for taking the time to explain this.

Can you help me work out what the settlement figure would be after 6 months.

Many thanks.

bigdave1973

00mrmark00 wrote: »

Yep...

http://www.alliance-leicester.co.uk/loans/index.aspx?ct=primarynav

Got the offer in writing.

Wow! Thats a good deal!!

Rob71

00mrmark00 wrote: »

Can you help me work out what the settlement figure would be after 6 months.

Many thanks.

Bit hard to say, but look at this loan calculator - it should be prefilled with the details you gave in your original post.

At 6 months the outstanding balance would be £5,807.86 - but I guess they'd charge you next months interest (£43.07), making a "grand" total of £5850.93.