Loan amount hardly going down, payments go towards interest!

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nLinked
nLinked Posts: 9 Forumite
in Loans
A friend of mine who can only make the minimum payment per month on a £12k loan, but it seems to only pay for the interest (25% Barclays), and the £12k balance has remained for 2-3 years? Obviously something not right there.

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  • jonesMUFCforever
    jonesMUFCforever Posts: 28,898 Forumite
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    Could it be interest only?

    Could it be that PPI was front loaded increasing the original amount owed??


    Without proper figures with amount borrowed over how long at which APR and whether insurance was added we cannot help.
  • chanz4
    chanz4 Posts: 10,895 Forumite
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    or could be hes not paying the contracted amount...the guess is out
    Don't put your trust into an Experian score - it is not a number any bank will ever use & it is generally a waste of money to purchase it. They are also selling you insurance you dont need.
  • bris
    bris Posts: 10,548 Forumite
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    A loan normally has fixed payments, reducing the loan by a set amount every month. Is it a credit card? Paying minimum amounts every month usually refers to that, by paying the minimum amount on a cc you will make a very , very small dent in the balance, @ 25% possibly none at all.
    25% is insane, can they not get a cheaper rate elsewhere, even if it's spread across 2 or 3 cheaper loans.
  • nLinked
    nLinked Posts: 9 Forumite
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    bris wrote: »
    A loan normally has fixed payments, reducing the loan by a set amount every month. Is it a credit card? Paying minimum amounts every month usually refers to that, by paying the minimum amount on a cc you will make a very , very small dent in the balance, @ 25% possibly none at all.
    25% is insane, can they not get a cheaper rate elsewhere, even if it's spread across 2 or 3 cheaper loans.

    You're absolutely right! It's a credit card. Just got some details from him. It's a Barclaycard Gold Visa credit card with a credit card loan of just over £12k. Monthly min payments is around £250-270 (varies).

    It seems his payments are going towards interest all the time making, as you say, hardly a dent in actual payments.

    What's the best option? Is it easy to transfer to a cheaper interest account? Or is there a better way?
  • jc808
    jc808 Posts: 1,756 Forumite
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    Better way is not to do mid/ long term borrowing on a credit card.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
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    well
    12,000 at 25% is 12,000 x 25% = 3000 per year or 250 per month

    what was he expecting?

    he obviously needs to
    -pay more per month and/or
    -transfer, if he can, to a lower apr loan/CC; but of course that depends upon his financial circumstances which you haven't shared with us
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