Non-regulated loans

Taurus1949

I took a non-regulated loan out in 2006, and have paid 4 years of this loan. Recently I wanted to end the agreement early in order to change the product that we bought. It was financially impossible to end this agreement as the biggest part of the interest, i.e. £21,000 had been deducted over the first 4 years leaving only £5,000 to be recovered in the final 4 years, thus putting me in negative equity on my purchase. I have complained to the company, as I was not giving any information regarding how the interest would be deducted at the start of the agreement either by the Finance Company or its representative who arranged the loan and sold me the product. They say as it is non-regulated I have no form of redress. I have started a complaint with the Financial Ombudsman who has agreed to take the case, but I wondered whether anyone else had fallen into this trap. This problem has ruined our painstakingly made plans towards early retirement and the damage is not repairable.

ILW

All loans show interest up front as that is when the capital amount is at its greatest. As the capital amount reduces the balance between interest and capital payments reduces. it is the same with a repayment mortgage.

Taurus1949

Surely though, not to the extent that has happened to us, it is daylight robbery if you want to finish your agreement early. This loan is not from a shark but from a high street household name.

magpiecottage

ILW is correct - each month you pay a specified amount. Part of this will be interest on the amount outstanding and part capital.

As you go through the loan, each month (or possibly each year) the payment will remain the same but because you owe less than the previous month, less interest is charged and more of the payment is used to reduce the capital.

It snowballs until in the later stages you are mainly repaying capital with just a little interest.

The Financial Ombudsman Service can only look at complaints relating to unregulated loans if the event complained about took place on or after 6 April 2007 or the firm subscribed to its voluntary jurisdiction (which banks and building societies did but not most intermediaries or finance houses).

CLAPTON

how much was the loan for
how much the APR
how much the monthly payment
what was the period of the loan
how many payment have you made
what is the settlement figure they have given you
did you take out PPI if so what were the terms
have you missed any payments
were there any payment free periods at the beginning of the loan