Paying off loan early - no terms and conditions

nicnoo

Back in 2008 I took out a loan with HSBC for 62 months. I have 11 months left to pay and asked for a final settlement. The bank told me that the amount on my statement was the amount to pay and that I had already paid off all my interest. My arguement to them was that this was not stated on my terms and conditions that the interest would be paid at the beginning and by paying the loan off 11 months early would surely mean I would have paid too much interest and be due a refund in interest. HSBC now say they can not find my terms and conditions and that even though they do not know where my documents are, these are the terms!

Where do I stand if they do not have copies of my terms and conditions?

jonesMUFCforever

Interest would have been calculated daily so they are right to say that there is no refund of interest due.
I would not believe them when they say that the balance on the statement is the amount due to clear the loan.
Go into a branch and get the amount confirmed before you pay and cancel the direct debit.

nicnoo

But the terms state that at the beginning of the loan agreement they work out the interest I will pay over the whole period of my loan and add this to my loan balance so doesn't that mean the interest was charged and worked out for the 62 months? There is still 11 months to go on this loan so I would be paying 11 months extra interest?

opinions4u

How much did you borrow?

What's the rate?

What's the payment?

What's the settlement figure they say you owe?

Although a loan agreement will show the total amount payable assuming the loan runs the term, lenders will calculate interest (usually) monthly or daily. Assuming a monthly rate of 1% and a loan of £10k you're month one interest is £100 at the start of the loan but significantly lower towards the end of the loan. So while you shouldn't have to pay the interest due for the full term of the agreement, the amounts not charged won't be anywhere near the £100 a month being charged at the front end of the loan.

nicnoo

I borrowed £10,500 at 10.9% so amount owed was £13,747.22 and I pay £229.12 a month. The amount left to pay is 11 times 229.12 = 2520.32.

[Deleted User]

if you settle early you will get a small refund on interest paid,i suspect they just worded what they said badly

nicnoo

Spoke to them again today and they are still claiming that no interest is due to be rebated.

Apples2

There is no interest to rebate per se, there is nothing to rebate, you simply don't pay it in the first place.

Sounds like you are suggesting the loan is completely front loaded (all the interest is paid first, followed by the capital).

Have you actually formally requested a settlement figure?

Don't tip toe around it asking woolly questions, directly ask for the settlement figure today.

smartiedriver_2

Don't forget if you pay a fixed loan off early you will have an early redemption penalty, usually equivalent to 1month + 28 days' interest.

So this may offset the interest you think you are owed.

What type of loan is it?

nicnoo

Its a fixed loan and I have requested a final settlement figure twice now. If I have to pay an early settlement fee then I would have thought it wouldn't be as much as 11 months interest. I could possibly be wrong it what I feel is right but none of this was stated on my original contract.

CH27

Did you get the settlement figure verbally or in writing?