Loan - Early Repayment Advice

twinkstar

I really hope that you can help me. I am in shock!


I took out a loan from a particular high street building society for £10,000 over 7 years in May 2010.


Total Loan £10,000
Duration 80 months
Total Charge £5,046.20
Total Amount £15,046.20

Annual Interest 13.45%



The agreement was for £192.90 to be paid each month, and the first payment began 3 months after taking out the loan (as per the agreement).


I am now looking to pay an early settlement on this loan, and was completely shocked to find out that the amount they want me to pay is £9892.35! This means that 'on paper' all I have paid is £104 approx over 8 months, as opposed to the £1543.20.

When I enquired about this, I was informed that all the interest is bolted onto the front end of the loan and not spread across the months, which is what I was led to understand at the time of the loan and there is nothing in the contract that states that this is how their interest works.

I desperately wish to repay this before the next payment is due, but could really use some expert advice before doing so.

Thank you so much.

CLAPTON

you say you paid nothing for the first three months.
nevetheless interest would still be added so after three month you would then have owed about 10,320

you first payment was 192 ..of that about 10320 x 13.45%/12 = 109 was interest so you would only have repaid £83 of capital

so after 8 payments would would only have paid off 360 off the 10,318


simply reflect the fact that the interest in high in the early months because you owe a lot of money and then slowly falls as you repay... exactly the way mortgages work and very fair.

twinkstar

Thanks for coming back to me so quickly with this information - I think my thread shows my naivety when it comes to these matters.

I understand what you mean about mortgages and how they are 'front-loaded'. I agree that this is right and very fair. I think I confused the 'fixed monthly payments' as being payments that incorporated a percentage of the total interest over the course of the loan which they gave as a fixed charge amount.

Probaby slightly kneejerk on my part, but I have had so many problems with my building society that I now am now so suspicious of their intent.

I will just pay it off. At least, it will no longer be part of my future expenditure and I am just thankful that I am able to. Thank you so much for your sound advice. :A

chalkie99

What a refreshing change for an OP to respond in such a positive way.

Even the spring sun is shining today_party_

twinkstar

Well, thank you very much! I have just paid the loan off, and have successfully transferred my previous state of shock onto my building society! Now, that is good karma! I for one will be enjoying the sunshine now that my hairline no longer needs to recede further from stress! I should change my user name to 'Slightly Balding but Happy Bunny'!