Early repayment of TSB Loan costing me more?!

pauldonnelly16

First off – I’m not really a regular user of the forums so apologies if there has already been 50,000 posts on this subject already!!

I took out a loan with the TSB a couple of years back over a 5 year period, but I am now in a position to repay early. So, I rang them up for a settlement figure thinking to myself, “Great, should save myself a few quid here on interest payments by settling early”, but the woman on the phone informed me that by settling early I am gunna have to stump up almost an additional £200!! How does that work out?!

Surely as I’m paying off 3 years early I should be avoiding interest for the final 3 years - not paying for it all plus a bit more?!? I’m confused!

CLAPTON

what was the original loan
what was the apr
what was the monthly payment
what was the period of the loan

how many payments have you made
what is the settlement figure
did you have any payment free months or any missed payments
any PPI

pauldonnelly16

CLAPTON wrote: »

what was the original loan
what was the apr
what was the monthly payment
what was the period of the loan

how many payments have you made
what is the settlement figure
did you have any payment free months or any missed payments
any PPI

what was the original loan - £6,568.15
what was the apr – Not sure, would have to check documents later.
what was the monthly payment - £123.25
what was the period of the loan – 5 Years

how many payments have you made - 26 (i think)
what is the settlement figure – £3,536.75 (Outsanding balance at the mo is £3,420)
did you have any payment free months or any missed payments – 1 payment holiday, 1 late payment.
any PPI – Yes, mis-sold. Currently in process of reclaiming.

iolanthe07

It is quite common to have to pay an interest penalty if you settle a loan early. Typically this is between 1 and 3 months' interest.

pauldonnelly16

The total original loan amount of £6,568 included the interest for the 5 years. Because I’m paying 3 years early, shouldn’t 3 years worth of interest be deducted from the remaining total?

Why do I have to pay off the interest amount for the full 5 years, if I’ve only had the loan for 2 when I pay it off?

CLAPTON

what was the original loan amount (before interest)

amersall

pauldonnelly16 wrote: »

what was the original loan - £6,568.15
what was the apr – Not sure, would have to check documents later.
what was the monthly payment - £123.25
what was the period of the loan – 5 Years

how many payments have you made - 26 (i think)
what is the settlement figure – £3,536.75 (Outsanding balance at the mo is £3,420)
did you have any payment free months or any missed payments – 1 payment holiday, 1 late payment.
any PPI – Yes, mis-sold. Currently in process of reclaiming.

Hi there, if i were you i would wait for your mis sell ,as if you win this the loan will reduce by the ppi total amount. That is less to pay back, or pay it off now and if you win you get the whole refund back to you.A loan settlement figure is always more if you settle in the earlier years i believe.Plus your payment holiday and the late payment will be a bit more interest.

redpete

Can't tell how much you've paid off the capital because you haven't said how much of the monthly payment is PPI. Can't tell how much to pay because you haven't said what the charge for the missed payment was.

Difficult to know what they are including in the settlement for PPI.

I reckon the total you would have paid (£123.25 for 5 years) is £7395, or 7271.75 if they gave you one month 'free'.

The total they are now asking for is 6741.25, so some saving but not as much as you might expect.

shortchanged_2

pauldonnelly16 wrote: »

First off – I’m not really a regular user of the forums so apologies if there has already been 50,000 posts on this subject already!!

I took out a loan with the TSB a couple of years back over a 5 year period, but I am now in a position to repay early. So, I rang them up for a settlement figure thinking to myself, “Great, should save myself a few quid here on interest payments by settling early”, but the woman on the phone informed me that by settling early I am gunna have to stump up almost an additional £200!! How does that work out?!

Surely as I’m paying off 3 years early I should be avoiding interest for the final 3 years - not paying for it all plus a bit more?!? I’m confused!

I'm certainly not an expert on this matter but if I'm understanding you correctly you certainly sound like you are being ripped off, as it almost sounds like you are incurring a severe penalty to close the loan early.

As one of the other posters stated earlier the usual practice to my knowledge is to charge 1 to 3 months interest on the outstanding balance WITHOUT interest added NOT on top of the outstanding balance INCLUDING all the interest for the term of the loan.

pauldonnelly16

shortchanged wrote: »

I'm certainly not an expert on this matter but if I'm understanding you correctly you certainly sound like you are being ripped off, as it almost sounds like you are incurring a severe penalty to close the loan early.

As one of the other posters stated earlier the usual practice to my knowledge is to charge 1 to 3 months interest on the outstanding balance WITHOUT interest added NOT on top of the outstanding balance INCLUDING all the interest for the term of the loan.

Yeah, you are understanding me correctly - that's exactly the way i see things. I can't understand how they are trying to make me pay a full 5 years worth of interest if i settle after 2 years.

I'm not 100% sure on the exact details of the initial loan, and don't have the paperwork handy as i'm in work. Have a feeling the initial loan before interest & PPI was for £5,000 - but will have to look it up and will post the exact details of the loan later.

Someone mentioned PPI payments too? I have no idea how that breaks down monthly either, that too was lumped on top of the loan and included in my £123 monthly payments. Again, i'll find details of that too and post later.

Thanks for all the comments so far though!

CLAPTON

pauldonnelly16 wrote: »

Yeah, you are understanding me correctly - that's exactly the way i see things. I can't understand how they are trying to make me pay a full 5 years worth of interest if i settle after 2 years.

I'm not 100% sure on the exact details of the initial loan, and don't have the paperwork handy as i'm in work. Have a feeling the initial loan before interest & PPI was for £5,000 - but will have to look it up and will post the exact details of the loan later.

Someone mentioned PPI payments too? I have no idea how that breaks down monthly either, that too was lumped on top of the loan and included in my £123 monthly payments. Again, i'll find details of that too and post later.

Thanks for all the comments so far though!

just to add

the way early settlement of the loan is worked out i.e. the current balance plus at most two months interest payments, is determined by the CCA (i.e. is basically the law) so there is NO QUESTION that they can't charge you all the interest for the original period.

In this case however the fact that you had PPI and that you have missed a payment rather complicated the issue

Maybe when you have the full details we will be better placed to say whats happening.