Is this a loan scam?

djg275

I have just been persuaded to take out from Clydesdale financial services by a local window firm a fixed sum loan agreement, for 10 years.
I wanted to pay by cash, for the work to be carried out, but the salesman persuaded me that if I took the finance out that I would save in the long run approx one thousand pounds.

He says and even gave me a fact sheet on how to beat the system???
This is how he says it works.
amount borrowed 1,750.00 pounds
Documentation fee 75.00
Deposit Nil
Credit limit 1,825.00 pounds

First payment 39.62 pounds

Then he says I need to make before the second payment, a lump sum payment of 75% of the money owed. = 1,312.50 pounds.
Leaving me a balance of 472.88 pounds.

With 1.96% interest quoted on the sheet at the end of 12 months the loan will be repayed and I will have only had to pay 164.79 pounds in interest. Can anyone tell me if this is true?

The salesman said it was a 'get out clause that the finance company do not put in their written agreement.
The actual agreement states for early settlement

When a 1/4 of the term has elapsed the sum of 948.82 pounds will also need to be paid

1/2 term 790.48 pounds

1/3 term 507.04 pounds.

Have I just been a complete fool? and if so does anyone know I can get out of this agreement signed today?

withabix

Basically you've been conned by the salesman into taking a credit agreement so that he got his commission for selling the credit agreement.

A quick bit of mental arithmetic suggests you will have paid it off after a year if you do what he suggests.

Anwen_2

I don't see how that would save you a thousand pounds over cash, presumably he means it'll save a thousand pounds compared to paying the loan off over 10 years. Is there not a penalty for paying the loan early?

I believe that all credit arrangements are required to have a 14 day 'cooling off' period, there should be information on this in the t&cs of the agreement. Have a look, if you can't find anything call Clydesdale or the window company.

poorbutgettingricher

with the monthly payments of 39.62, you would have paid back 4754.40 at the end of the 10 year agreement.

if you had the 1750 cash to pay upfront, you will still have lost out, but but paying it back in a year rather than the 10 year agreement, you will have saved yourself 3000 pounds.

id have insisted on paying cash!

Robert_Sterling

Is this loan a scam.
For legal reasons I decline to answer.

ManAtHome

djg275 wrote:

Then he says I need to make before the second payment, a lump sum payment of 75% of the money owed. = 1,312.50 pounds.
Leaving me a balance of 472.88 pounds.

With 1.96% interest quoted on the sheet at the end of 12 months the loan will be repayed and I will have only had to pay 164.79 pounds in interest. Can anyone tell me if this is true?

The salesman said it was a 'get out clause that the finance company do not put in their written agreement.

Looks like he's claiming the bank will pay you 1.96% interest per month on over-payments. (do they do savings accounts?).

A verbal statement aint worth the paper its not written on...

rog2

Sounds very 'dodgy' indeed. You certainly need to check the small print very carefully, I would be surprised if there was no financial penalty for overpayment or early settlement. Generally the only ones who can 'beat the system' are the lenders.
If, on the other hand, you have found a genuine 'loophole' then I am sure that Martin would love to hear from you.

golden_girl

I remembered this happening to us about 2 years ago. We was having a kitchen fitted and wanted to pay in cash. The salesman came up with a similar idea to the one you were given.
The next day we both decided we didn't want to do this and I phoned the finance company to say I wanted to cancel this agreement and I also sent a recorded delivery letter with the original copy of the agreement. (Kept a copy).

All we had to then was pay the full amount once the job was completed.