Barclays!!!!!!

Karly_2

I have had a personal loan of £5,000 with Barclays for a couple of years and they have now offered me an extension of a further £5,000 at 7.9%. They state that part of this (£3,000) will be used to pay of the existing loan which has three years to run. Since the new loan would be for 5 years are they not charging me interest on the £3,000 twice????????!!!!!

Rip off or what????????? This has to be illegal!!!!!!! How can they get away with this????????????

regularsaver1

the existing loan is being cancelled - you could always take the new loan at 3 years instead - they have maybe offered you 5 years based on your affordability of £5k over 5 years

so in a way yes, but also no - as its optional

Karly_2

Thanks for the reply but that's not right for two main reasons.

Firstly, there isn't the option - the initial loan agreement is cancelled without you having the choice.

Secondly, the time periods of the previous and new loan are irrelevant as the interest is still being charged twice.

This must be illegal!!!!!!!!!!!!!!!!!! Someone should do something about it!!!!!!!!!

regularsaver1

it is optional - you don''t have to take the additional money - therefore optional

interest is not being charged twice as the £3k will be recalculated from 3 years to 5 years- but £3k over 5 years is more than over 3 years

the only other option is to look elsewhere for a £5k loan

Karly_2

Well in that case everything is optional!

Interest IS being charged twice e.g. Take out a loan of £5,000 for 5 years = total repayment of £7,000. At the end of year 2 you are offered another loan of £5,000 for 3 years = total repayment of £6,500 and have already paid off £3,000 within 2 years i.e. you now owe £3,500 giving you a net of £1,500.

The £3,500 in in the first instance incorporates both capital and interest and is then charged again to result in the second instance i.e. you are charged £3,500 interest on a loan of £6,500 for 5 years!!!!!!!!!! THAT IS CHARGING INTEREST TWICE!!!!!!!!!

IT IS ILLEGAL!!!!!!!!!!!!!

regularsaver1

its called consolidation - its a whole new loan so the term set is all new. I'm suprised that Barclay's say you must consolidate existing loan though

you are borrowing more money so more interest

i know you say its illegal - but i'm sure many banks do this - what did Barclays say when you responded to them?

Karly_2

It's not really consolidating as a new loan is only being created by them to make more money i.e. one loan need not be created.

They just say that you have to use the proceeds to pay off the existing loan and will not allow otherwise.

This is an amzing scam!!!!!!!!!!!!!!!!!!!!

enjoyincubus

Karly wrote:

Thanks for the reply but that's not right for two main reasons.

Firstly, there isn't the option - the initial loan agreement is cancelled without you having the choice.

Secondly, the time periods of the previous and new loan are irrelevant as the interest is still being charged twice.

This must be illegal!!!!!!!!!!!!!!!!!! Someone should do something about it!!!!!!!!!

I would call the police. Or something.

No seriously they are not doing anything wrong or illegal. They are just offering you another loan to try and keep you as a customer and make some more money out of you.

The £3,000 you owe has not yet had interest charged on it yet as interest has not yet been accrued. If you were to take how much the original loan was for, plus the interest (it will be in your credit agreement) and then take away your monthly payment multiplied by how many payments you had made you would find that you owe a bit more than £3,000. This is because when you took out the loan they assumed you would pay over the full term and thus had charged interest accordingly.

For example:

I take out a loan for £5,000 over 4 years. With interest the total amount advanced is £6,000 (£5,000 for me and £1,000 to Barclays for interest). After 2 years I decide to settle loan early. You would assume that I would owe half what the total loan advance was for. However this assumes the full interest will be charged over 4 years. Therefore instead of me owing £3,000 as you would expect (exactly half), I actually owe £2,500. The £500 difference was due to be charged in interest over the next 2 years.

In your case Barclays are offering to settle your loan early (and forgoe the interest income they would have charged you over the next few years) and instead offer you a new loan over a new term. The £3,000 you owed would be paid off by this new loan and they would give you £2,000. Then you would start all over again and begin the process of accruing interest again. Say for example you win the lottery and decide to pay the £5,000 off after one month, all you would owe would be the original loan amount plus one months interest. You would not have to pay the interest for the whole five year term.

However this is optional. If you feel you are getting a bad deal then you can tell Barclays to sod off and just continue to pay your existing loan as normal. They are just using a marketing tool to keep you, as lots of customers settle early and move to another lender, which is not good for them as it means they lose money on the loan instead of making a profit from interest income.

regularsaver1

enjoyincubus - thank you for explaining things far better than me

enjoyincubus

regularsaver1 wrote:

enjoyincubus - thank you for explaining things far better than me

It's no probs. We are all conditioned these days to think the worst in the banks and so I could see why the OP was getting a bit annoyed by the fact he thought he was getting ripped off by them! However for once it looks like the bank wasn't at fault on this one so just wanted to explain why!