Rule 78.

Tr@cker

I think some pressure should be put on lenders to get rid of this hideous rip-off. Last i looked some 60% pay off their loans early and are subject to this antiquated way of settlement.
APR's might be a bit higher with those who offer flexible payment loans but it can actually work out cheaper if you pay up early as ive done this myself recently on a loan with egg.

RibenaBerry_2

But the rule of 78 has already been abolished for new loans (since May 2005). Do you mean on existing loans? Whilst I agree that it's a rip off, it would be difficult to require lenders to totally rewrite the terms on existing borrowing - not least because surely the interest/capital split wouldn't add up if you changed the basis half why through?

Bewitched2761

forgive my ignorance but what is rule 78?

Chrismojam

Bewitched2761 wrote:

forgive my ignorance but what is rule 78?

A rather complicated equation for working out the interest/settlement amount owed by the customer when they want to settle a loan early.....I used this to check out I wasn't getting ripped off (for more than I was already....)...just to check the calculations...so I knew how much they would be asking for.

CLAPTON

if you really want to know the details (i wouldn't recommend it though) but the details are here

http://www.home.co.uk/guides/loan_glossary.htm?rule

Chrismojam

CLAPTON wrote:

if you really want to know the details (i wouldn't recommend it though) but the details are here

http://www.home.co.uk/guides/loan_glossary.htm?rule

From the above site:

However, you may be unpleasantly surprised by how much of the capital sum of your loan remains outstanding.

Too bloody right!

I had this years ago with a loan from Safetstyle....:mad: at the time OH wasn't working and I'd just bought my house so I went for the lowest monthly payment...thinking ooh that's good I can afford that....:rolleyes: not realising what I was REALLY signing up for....when it dawned what I'd done....I got a loan and decided to pay it off...that was when I had trouble getting settlement figures from them....and of course not knowing about the rule of 78 I was mightily !!!!ed off to find that of the £7/800 odd I'd paid off so far...only about £60 had been paid off the capital:eek: Never again!