Outstanding balance versus Settlement Figure

azkaban420

Hi all,

Trying to get to grips with my finances, and using the awesome snowball, but I think I've made a bit of a boo boo on my figures. I rung my personal loan co to ask them what the outstanding balance on my loan was (£15k taken out in Apr 2008, paying £248 p.m. towards it) and they told me it is £15,410 - gulpety gulp. Then when I asked about a settlement figure they told me it's £12,346.

This is what's kinda confused me as I had initially put the settlement figure in my snowball calc. I know the higher amount is based on the interest they charge (9.83%) but if I settled early it would be £3k less and a penalty of 2 mths interest.

I presume unless I balance transfer this, I need to use the higher amount of £15kish on my snowballs?

Seems unbelievable that it's an extra £3k odd, all made up of interest over the life of the debt, but even more sickening that after 2 years of paying almost £250 a month, I haven't even dented the loan!!

My credit rating is excellent, so I could technically balance transfer it or something (but reluctant to do too much as I'm hoping to buy a house soon/get a mortgage) but does anyone have any thoughts on the best way to manage this loan (apart from overpaying ofc, which I'm going to do anyway)?

Makes me laugh because when I rung them to get their details for the overpayment, they told me they don't recommend I do this, and offered me a top-up loan!!!

No wonder so many people struggle with debts!!

Az

Tixy

Hi Az

I would say that the APR you are paying is not bad (maybe not the best but certainly could be a lot worse).

Even with a good credit rating you may struggle to get another £12k of credit to move the debt to (obviously depends on how much you earn but £20k credit is pretty high, which is what they would assess you on + any other credit you have).

I think, as you say, that the best way to tackle this is with overpayments when you can.

Is the £15410 the total number of repayment x the amount of repayment (ie 62repayments at £248? if so then I think if you use that figure in the snowball it would actually assume you were paying all that and then 9.83% interest on top, you need the actual balance now, and then it will calculate the interest on top (I think).

azkaban420

Thanks Tixy, I think I've got about £8k on c/c that I can move some of it to, on a 6.9% interest for the life of the balance sort of thing, but I guess I'd need the whole amount of £12k (the settlement figure) for it to make a difference?

I might give them another call and ask them about what the interest/figures would be if I did that...sorry to sound so dense, but it seems more confusing than my c/cs (which are now on 6.9% interest for the life of the balance, so more straightforward).

Az

azkaban420

Ok rung them again, and basically the settlement figure is a lot lower as my loan is over 7 yrs (been with them for 2 yrs) so my amounts including interest are calculated over the 7 years so if I was to pay them it all off much sooner, it's almost like an interest rebate, as they wouldn't expect me to pay the full interest of 7 yrs for settling much earlier...makes sense now.

I will look at my figures and the snowball calc again, and may transfer all of this debt over to my other c/cs (as long as it's the lower interest rate for life) and see what difference that makes.

azkaban420

And Tixy yes, sorry, looks like the £15k odd is based on the remaining months x repayment amount (so 64 ish mths x £248)

Thanks,

Az