Advice on loan, thanks in advance!

[Deleted User]

Hi

I took out a BOS personal loan for £7000 over 7 yrs in March 2010 at 11% APR. I have been paying it each month by direct debit and recently received my first annual statement. The balance of the loan is £8700 so I assume they have added all the interest at the start. My questions are therefore the following -

1. Is this common practice with a personal loan?

2. Is there no advantage to paying off the loan early as I have already been charged all the interest due?

Many Thanks!

opinions4u

1) Yes.

2) Lots of advantage, because they will rebate interest for the period after the point you pay it off.

[Deleted User]

Thanks for the reply. With the second answer, would it make sense to try and pay off the balance with another loan at a lower APR? I actually work for a banking group and can get quite a good staff discount on a personal loan through them. The APR would be about 7.5% instead of the 11%.

paddyrg

Yes, you'll save a few quid in interest (assuming the set-up costs don't cost you more than that!)

You may find it easiest to pay of *nearly* all the loan as a lump sum, then let them collect the final payment/payments by direct debit as usual - this sometimes saves people from any early redemption penalties depending on how BoS have set things up.

[Deleted User]

What I didn't want to happen was be charged all the interest on the BOS loan anyway and then take out another loan to pay this off and have to pay all the interest on that as well. Hope this makes sense.

opinions4u

itsmrb wrote: »

What I didn't want to happen was be charged all the interest on the BOS loan anyway and then take out another loan to pay this off and have to pay all the interest on that as well. Hope this makes sense.

Pick up the phone.

Ask BoS for a settlement figure.

Check how long it's valid for.

Assess the value for the new loan, ideally reducing the term slightly if you can.

If favourable, get on with the application.