Paying a loan off in full settlement

trooperboo

Hi. 3 years ago my partner and I took out a 5 year fix-rate fixed-interest loan with a major finance company. This month will see 3 years of pristine on-time payments.

However;

I have just been made redundant :mad: and of course life is very hard @ the moment. We borrowed £20K and agreed to pay back £25K including interest. We currently have an outstanding balance of approx £9200 (we need to confirm exact amount as it may be less than this).

Basically my parents have offered to give me £5000 to pay off this loan. How do i go about finding out if the loan company will accept this, and if they do, is it true that because they have accepted the offer, it cannot damage our credit rating as we had never defaulted, rather they chose to take us up on what we offered???

Is £5000 an acceptable offer? The way we see it, we borrowed £20K and by paying £5000 to settle the loan, the outstanding amount that is left is only interest; the actual £20K we borrowed is more than paid off.

All advise and guidance will be gratefully received. :T

CLAPTON

Its highly unlikley that they will accept any offer less than the full settlement figure until you stop paying (i.e. until the loan is in default).

After a while, they will probably accept a reduced payment. They may or may not mark your credit record as settled.

In any event your credit record will be trashed for 6 years.

minimadtrix

You could make an overpayment of £5000 and then, after that has cleared, you could ask for a settlement figure. However, you really need to get a settlement figure now to see exactly how much you owe. In theory, if you pay off 5k now, you are reducing your loan by approximately 1 year, so 1 years worth of interest would be deducted.

This is a very basic way of thinking, but you might be pleasantly surprised by the outstanding figure.

You could then see if you could renegotiate your loan, if you couldn't completely pay it off after the 5k has been paid, thereby reducing your outgoings at this diffficult time.

savingmummy

We have been told if we wish to pay off my hubbys it has to be the full amount! You will need to contact the bank/loan company and discuss it as it may be different in your case.

Sorry about the reduncency, was your loan protected? my father was made redundent in july09 and his loan was paid off x

standupguy

minimadtrix wrote: »

In theory, if you pay off 5k now, you are reducing your loan by approximately 1 year, so 1 years worth of interest would be deducted.

.

The op says it was a fixed rate loan rather than a variable rate so any advance payment will not reduce the amount of interest payable until a full settlement was received.

The £5000 will be short of the full settlement figure and therefore will just put the account into credit.

minimadtrix

standupguy wrote: »

The op says it was a fixed rate loan rather than a variable rate so any advance payment will not reduce the amount of interest payable until a full settlement was received.

The £5000 will be short of the full settlement figure and therefore will just put the account into credit.

I've had fixed rates in the past and been able to do this.

CLAPTON

standupguy wrote: »

The op says it was a fixed rate loan rather than a variable rate so any advance payment will not reduce the amount of interest payable until a full settlement was received.

The £5000 will be short of the full settlement figure and therefore will just put the account into credit.

whether is variable or fixed interest rate makes no difference.
whether you can make overpayments depends upon the T&Cs of the loan and not whether the interest rate is fixed or not.

trooperboo

minimadtrix wrote: »

I've had fixed rates in the past and been able to do this.

Hi

thanks for all replies. But mine is "fixed interest" which means that i am supposed to pay the agreed amount of interest (in our case £5k on top of the £20K loan) irrespective of when i settle the loan, be it early or the full 5 years.

I will still need to get a total figure, but working on the payments i have made, i belive that after this months payment, £6000 will cover all of the money we borrowed and then some. ( I originally thought £5K would be enough but i think i will have to top-up my folks offer)But that means that the loan company have made little or nothing on the loan.....in these current times, is it likely that the will accept this sort of offer to just 'get shut' of the debt? I get the impression that loan 'products' did not 'work' for this company as the company i owe money to have not been offering loans for quite some time now, i have no idea why, they just seem to be concentrating only on credit cards. I'm hoping they'll just want to put an end to my loan :rolleyes:

And no, i didnt take payment protection as this was very much frowned upon at the time. However, i doubt i could claim on it as i have started a new job straight away, albiet a very badly paid part time job!

minimadtrix

Well, if they say no to the 5k payment alone, once you've got the settlement figure, you could always look at a 0% balance transfer credit card for the rest - some are offering 16 months interest free, so, again this would reduce your monthly outgoings - roughly £65 a month as opposed to whatever you're paying now.

trooperboo

Ah, i like that suggestion, but who will offer me a credit card on the income i have at the moment?

And i still have to pay my parents back for the £5K they will 'give' me.....

CLAPTON

trooperboo wrote: »

Hi

thanks for all replies. But mine is "fixed interest" which means that i am supposed to pay the agreed amount of interest (in our case £5k on top of the £20K loan) irrespective of when i settle the loan, be it early or the full 5 years.

I will still need to get a total figure, but working on the payments i have made, i belive that after this months payment, £6000 will cover all of the money we borrowed and then some. ( I originally thought £5K would be enough but i think i will have to top-up my folks offer)But that means that the loan company have made little or nothing on the loan.....in these current times, is it likely that the will accept this sort of offer to just 'get shut' of the debt? I get the impression that loan 'products' did not 'work' for this company as the company i owe money to have not been offering loans for quite some time now, i have no idea why, they just seem to be concentrating only on credit cards. I'm hoping they'll just want to put an end to my loan :rolleyes:

And no, i didnt take payment protection as this was very much frowned upon at the time. However, i doubt i could claim on it as i have started a new job straight away, albiet a very badly paid part time job!

can you tell us the company?

can you tell us why you think it's a fixed 'interest' loan as this would be illegal under any loan regulated by the CCA (which the vast majority of unsecured loans are)