help- is this figure right for total settlement?

neenmarie

Hi
We have a loan which we took out 2 years ago. We borrowed £7,500 over 4 years and the interest rate is 15.9%. I have requested a settlement figure and the figure is £5,230.51. Does this sound right? Have they still added the interest on for the whole term agreement? We currently pay £207.00 back a month and I have worked out that the capital is around £138 and the interest about £69.00. Surely if we have only 28 months left to pay without the interest for this period it should be the capital x months left = settlement figure. On those working outs the settle ment figure I get is £3864.00 and not £5230.51, thats a difference of £1366.51.

Can anyone shed any light on this for me? Have I got it completely wrong?
Thanks

CLAPTON

be precise

was it 2 years (24 payments ) ago or 20 payments ago
was there a month or so payment free at the beginning of the loan

your loan agreement will tell you the settlement figure at 1/4, 1/2 and 3/4 way through the loan; what do they say

the average interest may well be 69 but that isn't the way its worked out

in the early months you owe a lot of money and you are charged interest on that ... so the first month you pay 7,500 x 15.9%/12 = £93 in interest
each month the interest gets less as the capital goes down

just like mortgages etc.

the early settlement figure will be the capital remaining plus maximum of 2 months interest

neenmarie

Hi thanks for the reply.

We took the loan out in Jul 2009 and had 1 payment holiday so the loan term should finish in August 2013, so another 28/29 months to pay off. If the capital works out at 138.00 x this by say 29 months + 2 months interest is still only £4140???

They are also saying our agreement does end till October 2013 which is another 2 months added on???

neenmarie

Oh i'll have a look at our agreement and see what 1/2 loan should be. Thanks

CLAPTON

neenmarie wrote: »

Hi thanks for the reply.

We took the loan out in Jul 2009 and had 1 payment holiday so the loan term should finish in August 2013, so another 28/29 months to pay off. If the capital works out at 138.00 x this by say 29 months + 2 months interest is still only £4140???

They are also saying our agreement does end till October 2013 which is another 2 months added on???

you have not understood my post I'm afraid

at the beginning of the loan the interest is higher than at the end
so tha capital you pay off inititally is less each month than at the end of the loan


you do NOT pay off £138 capital each month

neenmarie

Ok but when I asked them for a break down of the capital they won't tell me. I'm not paying interest to them for the next 2 years if I settle now.

chalkie99

neenmarie wrote: »

I'm not paying interest to them for the next 2 years if I settle now.

Realistically, if you agreed to borrow a lump sum over a fixed period you don't have the option to negotiate the terms now.

CLAPTON

chalkie99 wrote: »

Realistically, if you agreed to borrow a lump sum over a fixed period you don't have the option to negotiate the terms now.

I'm not sure what you mean

the loan can be repaid early and most of the remaining interest will be 'refunded'/not charged