HELP - DAS / loan interest question, is this fair?

jc1970

Hi, First post, great site!...

I decided last September enough was enough, and took the decision to see a debt expert.

On november I started a DAS, which will take me approx 5 years to pay off all my debt. It is a weight off my shoulders. all the interest has been frozen, and I can see the debt come down.

One quesion I have. All of my CCs froze the interest, and I am happy with the arrangement, however my bank loan, with RBOS, the full interest has been applied. So the the outstanding amount is the total owed plus the total interest. I spoke to the bank and they say the interest was applied at the start and I can't get this removed from the repayment.

is this correct? Any advice what to do?

thanks
J

DEVONLIFE_2

Hi jc1970
I think RBOS are correct. The interest on loans is added at the beginning of the agreement. I am no expert but certainly in my experience this has been so.DL

jc1970

thanks, So i am paying the full interest of the 25K loan, even with the DAS introduced after 2 years
!!!!!!, i thought i could get the interest froze so i anly pay for the 2 years (already paid)

Tixy

Although I know very little about DAS I'm not sure this is right - as it is mandatory to suspend interest & charges.
Might be worth contacting your official money adviser or perhaps national debtline for clarification on this.

Miss_Poohs

Hi JC1970 - my husband is in a DAS and NR front loaded all the interest on his loan too.

I can tell you its a scary total!! :eek:

We are currently looking into reclaiming the PPI my husband was forced to take when he signed uo for the loan - no guarantees, but its worth a try.

I can't help think its a dodgy set up front loading the interest.

I mean how would it work if you repaid the loan early?

Best of luck.

DarkConvict

Its pretty standard to have interest put on first.

Say you have a loan for £2000 @ 10% for 5 years, then on the day they give you £2000 you already owe £3000. The monthly payments just mean the £3000 is paid off over 5 years.
Same applies with things like car insurance, you start with owing the total figure and pay monthly to bring the balance to £0 in 12 months.

It means that if you default the full amount is already outstanding. They won't be continuing to add interest as it is already added, the only thing is late payment charges.

Miss_Poohs

Forgive me for sounding thick - but say if after that 2.5 yrs you decide to pay off the balance, is the remaining interest on the balance forgiven?

DarkConvict

It depends on the loan terms.

Increased repayments on loans often reduce the term of the loan not the amount you pay back, as basically if you pay more you hit the £0 mark sooner as interest is front loaded.

Some loans do have early settlement arrangements where by if you pay within the first 25% 50% 75% of the loan, you get a discount. I.e. Take out a 5 year loan at 10% for £2000. If you repay in year 1 you pay £2500, year 2 £2600 etc. These are settlement figures, cheaper than going all the way but still you end up paying in a way for early settlement of he loan.

Then there are some loans that are purely interest based, you get £2000 the balance starts at £2000, then interest is just added over time and your payments taken off monthly. I believe this is the traditional approach.