Welcome Finance - 66 years to pay off !!!

zelig

Hi All

I think I have moaned about this before but didnt get much of a respones...so here goes agan ...

I am paying back a £13,000 loan from Welcome at £101.86 per month - I have recently recieved a statement which tells me every month I am paying £85.27 per month as "Capitalisation" which I assume is interest? - They tell me my annual interest is 8.70%

So in one year I have managed to pay £193.56 which by my calaculations means I will be 117 years old by the time I pay the full ammount off !!

Surely some mistake??

Thanks and keep up the good work

Zelig

CLAPTON

your figures are a bit sparse but a 13,000 loan at 8.7% and paying £101 per month will take about 25 years to pay back
(assuming no fees etc)
as you pay a little capital back each month then the interest will fall a little over time; just like any mortgage

what were the original terms of the deal; have they been changed?

opinions4u

It would help if you told us what your loan agreement says ... how many months is it intended to repay the debt in?

My guess is that it's meant to be 25 years.

So in one year I have managed to pay £193.56 which by my calaculations means I will be 117 years old by the time I pay the full ammount off !!

Yes, but your debt also reduces each month. So as the debt reduces a little, so does the interest charged. Assuming your monthly payment stays the same this means that more capital will be repaid in each subsequent month which will accelerate the debt reduction.

zelig

Thanks all for your replies -

The original debt was for £13440 and was taken out 21/12/07 for 300 months
My closing balance is £13024.03

So are you saying then that £85 isnt exessive as interest on £101 payment per month?

Zelig

CLAPTON

well

monthly interest on 13,400 is approximately 13,400 x 8.7%/12 = £ 97
and monthly interest on 13,024 is approximatley 13,024 x 8.7% /12 = £94
what were you expecting it to be?

it is simply the result of borrowing over such a large time (25 years)... in the early stages your month payment is largely interest and only a little capital

CLAPTON

also

I don't know if you can overpay monthly to pay off the loan early
but if you upped your monthly payment to about 135 per month then you could clear the loan in 15 years and reduce the interest paid from the current 18,000 to about 10,000
or if you upped your monthly payment to 165 per month then you would be clear in 10 years and only pay 6k in interest rather than more than 18,000

iolanthe07

As others have said, in the early stages of a long loan most of the repayments go towards interest. In the later stages most of the repayment will go towards principal. It all works out in the end.

zelig

OK cool many thanks for your replies ....

One more thing ...Welcome told me originally that this was an unsecured loan (as I had absolutley no equity in my home)

It turns out that this was named as a secure loan - strangley enough though it doesnt appear against my title deeds !!

geoffky

zelig wrote: »

OK cool many thanks for your replies ....

One more thing ...Welcome told me originally that this was an unsecured loan (as I had absolutley no equity in my home)

It turns out that this was named as a secure loan - strangley enough though it doesnt appear against my title deeds !!

Stop paying and it soon will..:rotfl::rotfl: