Have I been mis-lead in to loan?

ViolaLass

The interest rebate means that the loan wasn't really front loaded and you are not any worse off. It's not clear what you mean by the repayment being double what you thought it would be.

Hanky_Panky

ViolaLass wrote: »

The interest rebate means that the loan wasn't really front loaded and you are not any worse off. It's not clear what you mean by the repayment being double what you thought it would be.

:rotfl::rotfl::rotfl:

Jollyroger_2

Yeah,

I thought that the repayments would include a fixed interest amount per month, so for example say the repayments were £180 pm and the total interest for 60 months is £3000, then £50 of the repayment per month would be interest so say there was 15 payments left then the settlement would be £1950 and not £2700.

That is where I have got confused and misunderstood as it isnt clear in any of the documentation I have.

~Brock~

Jollyroger wrote: »

Yeah,

I thought that the repayments would include a fixed interest amount per month, so for example say the repayments were £180 pm and the total interest for 60 months is £3000, then £50 of the repayment per month would be interest so say there was 15 payments left then the settlement would be £1950 and not £2700.

That is where I have got confused and misunderstood as it isnt clear in any of the documentation I have.

It doesnt work like that.

If the interest was added monthly then more would be added in the earlier months than the later months, reflecting the higher balance at that point. The settlement figure would be the same regardless of the method of adding interest....the rebate on a pre-computed balance brings it back into line.

If your agreement stated a fixed amount of interest and a fixed rate of interest then it is pre-computed, front loaded or whatever people want to call it and the opening balance is the balance displayed on the loan agremeent. I really don't understand how that can be in any way misleading.

You appear to be mislead more by your own incorrect assumption about how it should work rather than the correct way of how it is working.

ViolaLass

Jollyroger wrote: »

Yeah,

I thought that the repayments would include a fixed interest amount per month, so for example say the repayments were £180 pm and the total interest for 60 months is £3000, then £50 of the repayment per month would be interest so say there was 15 payments left then the settlement would be £1950 and not £2700.

That might be true on average but at the beginning of the loan, more of the payment went on interest than it would at the end of the loan. That means that at teh beginning, you were paying less off the capital than you would towards the end.

Think about it, if you paid off half the loan, say, why would the monthly interest stay the same? The payment stays the same but the amount that goes towards the capital changes.

Jollyroger_2

Thank you for all your replies.

I understand it all now, just would have been nice to have had that explained before taking the loan or at very least in the T&C.

Just a shame that the car is worth less than the loan repayment

opinions4u

I understand it all now, just would have been nice to have had that explained before taking the loan

To be fair, it should be blindingly obvious that at a point in time when the debt is, say, £10k, the interest being charged will be more expensive than when the debt is £5k.

To expect different is pretty bizarre.