Paying loan off early, why still pay full term interest?

DocHants

I had a 5 year loan, I decided to pay off early, after just 2 years.. but I was still charged the remaining 3 years interest...

Is this because at the time of taking out the loan, they add the full terms interest onto the loan..?? So I borrow say 6k, but in fact it is more like 8k (after interest).. so I pay off 2k over 2 years, but still have to pay the other 6k to repay the loan early??

Surely I should only be paying interest on the loan for the duration of the time I had it...???

So theres actually no benefit whatsoever paying the loan back early...

suicidebob

The benefit is that you no longer have the debt hanging over you.

Some loan agreements have some sort of interest reduction for early payment built in, but in my experience these are usually minuscule amounts.

shop-to-drop

It really depends on the terms of the loan. It's really important to know the terms when you take out the loan. Some loans have no penalty for repaying early or only a small penalty. Some like yours charge the interest for the full term so no benefit to repaying early.

DocHants

I understand a early repayment penalty, but for that to be the same as the remaining term interest payments seems very harsh!!!

At the time of taking the loan out, you never really think of paying it back early.. but that seems more unfair than PPI mis-selling IMO!!!... I certainly would not expect to still have to pay back so much...

You live and learn.. always the hard way!!! Banks always win.. unless of course theyve mis-sold you PPI!

CLAPTON

DocHants wrote: »

I had a 5 year loan, I decided to pay off early, after just 2 years.. but I was still charged the remaining 3 years interest...

Is this because at the time of taking out the loan, they add the full terms interest onto the loan..?? So I borrow say 6k, but in fact it is more like 8k (after interest).. so I pay off 2k over 2 years, but still have to pay the other 6k to repay the loan early??

Surely I should only be paying interest on the loan for the duration of the time I had it...???

So theres actually no benefit whatsoever paying the loan back early...

when did you take out the loan
how much was it for
what was the APR
what period was the loan for
what were the monthly payments

when did you get a settlement figure
how many payments had you make


was there any PPI
or other complications (missed payment, payment free periods

CH27

DocHants wrote: »

I understand a early repayment penalty, but for that to be the same as the remaining term interest payments seems very harsh!!!

At the time of taking the loan out, you never really think of paying it back early.. but that seems more unfair than PPI mis-selling IMO!!!... I certainly would not expect to still have to pay back so much...

You live and learn.. always the hard way!!! Banks always win.. unless of course theyve mis-sold you PPI!

You chose to take accept their T&Cs & accept the loan.
You should always check what you are signing up to.

DocHants

You chose to take accept their T&Cs & accept the loan.
You should always check what you are signing up to.

Too true...

Still PPI's are now seen to have been mis-sold, or unfair :-)

Does anyone REALLY read all the T&Cs for anything??? Youd be thre for hours!

You just expect the sales people to tell you all the important bits, but they inevitably just tell you the bits you want to hear til you sign on the dotted line, then they dont care!!!

CLAPTON

DocHants wrote: »

Too true...

Still PPI's are now seen to have been mis-sold, or unfair :-)

Does anyone REALLY read all the T&Cs for anything??? Youd be thre for hours!

You just expect the sales people to tell you all the important bits, but they inevitably just tell you the bits you want to hear til you sign on the dotted line, then they dont care!!!

try answering my questions in my post above

CH27

DocHants wrote: »

Too true...

Still PPI's are now seen to have been mis-sold, or unfair :-)

Does anyone REALLY read all the T&Cs for anything??? Youd be thre for hours!

You just expect the sales people to tell you all the important bits, but they inevitably just tell you the bits you want to hear til you sign on the dotted line, then they dont care!!!

TBH the chance to overpay would be one of the things I would ask & check carefully but everyone has different priorities when taking finance.

DocHants

CLAPTON wrote: »

when did you take out the loan 2002
how much was it for £6000
what was the APR 13% (I THINK - HAD ME OVER A BARRELL!)
what period was the loan for 5 YEARS
what were the monthly payments £168 (inc PPI)

when did you get a settlement figure 2005
how many payments had you make 26


was there any PPI YES - GOT A CLAIM IN
or other complications (missed payment, payment free periods

Cant quite remember exact figures...

I do know that the total loan amount incl interest and ppi was £10,132.. I made approx £4400 in payments, then paid £4800 to pay off the loan.. so, total paid back was approx 9200.. the 900 odd difference was the PPI rebate for early repayment!

ERICS_MUM

DocHants wrote: »

Too true...

Still PPI's are now seen to have been mis-sold, or unfair :-)

Does anyone REALLY read all the T&Cs for anything??? Youd be thre for hours!

You just expect the sales people to tell you all the important bits, but they inevitably just tell you the bits you want to hear til you sign on the dotted line, then they dont care!!!

If you can't be bothered to read the T&Cs, why should they care whether or not you understand what you are signing up for ?