Have I been mis-lead in to loan?

murphy1315

Hi
Basically i had a loan with my bank with an interest rate of around 14%
To tidy up my finances and to save a few quid I applied for a Tesco loan with an apr of 7.7%
this rate was rejected and was offered a rate of 11.6%
I took out £12k
Great!
However Ive just phoned tesco to see if I can take a payment break (9months into loan)just to move a few DD around but they refused saying I would default?
Anyways I asked for a settlement figure so I could keep note and this was given as £11030
Now ive paid £2347 off the loan.
I asked why the figure was still so high and was told that the full interest was added at the beginning of the loan therefore my loan started at £15k?
They also said a rebate of about 2K would be applied in this figure.
I was under the impression that the interest would accumulate monthly as the loan with Halifax did. There being if I was to pay off early I would only be charged interset upto the date of the settlement.
Am i missing something here or was I just led by Tesco to believe I was getting a better rate?
This isnt anything to do with not being able to afford the loan I just wanted to rearrange some bills for a month but when heard this from advisor something doesnt add up?
If im wrong or missed something please let me know.
Im normally good at this stuff but cant seem to get my head around this?!
Thanx in advance all.

Mags_cat

What did the terms and conditions say about the interest? They should have spelled out how it would be added and what you would have to pay.

murphy1315

KEY FACTS
a: loan 12k
b: term 60mth
c: total payable 15k
d: payment 260/60mth
e: 11.6% apr

OTHER
a: purpose
b: 3600 interest
c: annual of 10.98%
d: payment allocation

The terms state APR, loan amount and the amount of interest to be applied but i cant find anywhere that it says the interest will be applied all at once.

When i asked the advisor on the phone to explain this she just kept saying to read my agreement.
I asked her to tell me where in the agreement and she couldnt or wouldnt tell me!
She said she would raise a complaint and somebody would ring me by Tuesday?
I had trouble with them when I first took out my loan as they took the first payment early.
To say sorry i was given 1000 clubcard points(WOW)
and was told that the manegement would review the written terms.

CLAPTON

No loans have interest front loaded
all loans simply charge the monthly interest as you go along
early settlement can include up to 2 months interest in addition to the capital sum remaining

however the information can be presented in two ways

a. by adding the capital plus all the interest and then saying you get a rebate for early setttlement
b. by quoting the capital remaining and add a max of 2 months interest

It's often the case that the call centre staff don't have access to the settlement figures on their screens.. so you need to ask for a written settlement figure
It's normal for most bank staff to not understand loans, APR, interest or the CCA loan rules

Although interest is not front loaded, nevertheless, as the monthly interest payable is calculated on how much is still owing, obviously in the early months of a loan you pay a lot of interest because you still owe a lot
so after 9 months of payments on a 60 month loan you will only have paid just over a 1,000 off the capital, the rest of your 2,347 would have been the interest.

Your agreement shows the early settlement figure for 15, 30, 45 months settlement

p00hsticks

As Clapton says, because you pay the same monthly amount throughout the whole duration of the loan, then in the early days the payments are mainly interest and very little capital is paid back. As you go though the loan and the capital amount outstanding decreases, then the interest owed on that amount will also decrease correspondingly, and so more of your monthly payment will go towards paying off the capital.

opinions4u

murphy1315 wrote: »

However Ive just phoned tesco to see if I can take a payment break (9months into loan)just to move a few DD around but they refused saying I would default?

If your loan agreement doesn't allow for a payment break and you choose not to make the payments then they are absolutely right.

While one or two loan agreements do have payment break flexibility it is by no means common. You take a loan. You agree to make the payments for the term. Just because you want "to move a few direct debits around" does not give you an automatic right to miss loan payments.

Anyways I asked for a settlement figure so I could keep note and this was given as £11030
Now ive paid £2347 off the loan.
I asked why the figure was still so high and was told that the full interest was added at the beginning of the loan therefore my loan started at £15k?
They also said a rebate of about 2K would be applied in this figure.
I was under the impression that the interest would accumulate monthly as the loan with Halifax did. There being if I was to pay off early I would only be charged interset upto the date of the settlement.

They can word it whichever way you like. They will be calculating things the same way Halifax do (or very similarly). Look at a Halifax credit agreement and you will see a total amount payable. Pay it off early and they will rebate it in the same way as Tesco - and you are right to state that they charge interest monthly. But 1% a month on a £12,000 loan is going to cost you more per month when the debt is nearer £12k than a few years in when the debt will be much lower.

This isnt anything to do with not being able to afford the loan I just wanted to rearrange some bills for a month but when heard this from advisor something doesnt add up?

Actually, you have consolidated up to £12k already and you want to miss a payment to reorganise your direct debits. Don't think of it in any woolly way. You do have financial stresses which you don't seem to be completely on top of and it's not up to a loan company to solve these.

murphy1315

Actually, you have consolidated up to £12k already and you want to miss a payment to reorganise your direct debits. Don't think of it in any woolly way. You do have financial stresses which you don't seem to be completely on top of and it's not up to a loan company to solve these.[/QUOTE]

This is not the case it is generally to reorganize DD

I had no intention of arguing with TESCO apart from i believe i was misled with the repayment agreement

~Brock~

If the interest rate is fixed, and the term is fixed, then the interest amount payable will be fixed and because it is a known figure it will be stated on the agreement and can be added by the lender on day one.

Upon settlement a rebate will be applied based on the unexpired term. Rebates used to be calculated using a formula known as the Rule of 78, but this changed a few years ago to an actuarial method, although there isn't a huge difference between the two.

If the agreement was taken after 31 May 2005 then there should be examples on the agremeent of the amount payable after 25%, 50% and 75% of the term has expired.

Assuming that the figure you have been quoted is consistent with these then you haven't really got much room to argue.

murphy1315

~Brock~ wrote: »

If the interest rate is fixed, and the term is fixed, then the interest amount payable will be fixed and because it is a known figure it will be stated on the agreement and can be added by the lender on day one.

Upon settlement a rebate will be applied based on the unexpired term. Rebates used to be calculated using a formula known as the Rule of 78, but this changed a few years ago to an actuarial method, although there isn't a huge difference between the two.

If the agreement was taken after 31 May 2005 then there should be examples on the agremeent of the amount payable after 25%, 50% and 75% of the term has expired.

Assuming that the figure you have been quoted is consistent with these then you haven't really got much room to argue.

again i want to stress this isnt a case that i necessarly want to argue
I am honestly just querying the whole setup of the loan and repayment agreement

opinions4u

I had no intention of arguing with TESCO apart from i believe i was misled with the repayment agreement

So what does the agreement say the settlement figure at 15 months will be? I don't really understand how you feel they have misled you.

Also, what date did you borrow the £12k?

What is the monthly payment?

How many monthly payments have you made?

murphy1315

opinions4u wrote: »

So what does the agreement say the settlement figure at 15 months will be? I don't really understand how you feel they have misled you.

Also, what date did you borrow the £12k?

What is the monthly payment?

How many monthly payments have you made?

@ 3/4 term 10K
@ 1/2 term 7.2K
@ 1/4 term 3.9K

i borrowed in june/july

the only reason i feel misled is the fact I bleive I wasnt fully explained that the interest was applied all at once.
Again I want u to realise in NO way am I trying to get out of paying this loan
I understand I took out an agreement that I am responsible for
However with everything going on nowadays that banks etc.. have misled people into ppi etc..
I would like to be certain that I havnt been misled into an agreement that I could of found an alternative!