loan agreements

jubreck

can anyone explain why on a fixed sum loan agreement companies can add interest to the interest when you have defaulted surley a fixed sum means a fixed sum as you are paying over the odds in interest anyway

dunstonh

part of the repayment covers the interest. If you dont make the payment it gets added to the loan and increases the amount you have borrowed. So, therefore you pay more interest.

zppp

jubreck wrote: »

can anyone explain why on a fixed sum loan agreement companies can add interest to the interest when you have defaulted surley a fixed sum means a fixed sum as you are paying over the odds in interest anyway

Because the reasons for defaulting are not because of the interest, it is because people can no longer pay the monthly payment amount due to a change of circumstances, or won't pay. I have seen people defaulting on loans of 8% interest before, so interest has little or no relevance to default interest.

Tixy

Its a fixed sum agreement providing you stick to the agreement. When someone defaults they have broken the agreement, so its reasonable to be charged more.

Otherwise there would be no incentive for anyone to pay back in accordance with the agreement.

Whether a fixed sum agreement means you are paying way over the odds in interest is subjective I suppose. People don't have to take the loan, if they choose to presumably its because they are happy with interest being charged.