Interest charges up front!!

THEWASP600

My partner has a loan with Barclays for around £3500 over 5 years. She has been paying it for around 18 months and has only paid off about £600, and has paid around £780 in interest. She pays about £88 p/m and is charged £43 p/m interest.

I asked her to call them so they could explain what is going on - and it appears they are taking ALL the interest up front.
So if she is able to pay the loan off early, or transfer it to a low/ 0% rate card she still has paid around half her total interest over 18 months. The bank will not give this interest back pro-rata.

How can this be legal? If she pays the loan off she has till paid future interest.

I have always hated barclays as they are theiving scum (i managed to get her bank charges back though!).

Can anyone help or advise?

jonesMUFCforever

She should have read the credit agreement before signing.

THEWASP600

Thanks for the useful tip!

The advisor she spoke to today could not find any reference on her credit agreement to specify how the interest was to be taken, so even the bank's own staff are in the dark. How are mere mortals supposed to cope?


No more sarcastic comments please, there are plenty of other forums you can go to if you want to do that.


I thought this site was about helping others from your experiences, perhaps i was wrong.

tom188

With fixed rate loans your repayment is sometimes set so that you pay the same amount each month for a fixed period. As in the early years you owe more most of the repayment goes towards paying the interest and a small amount towards repaying the capital. As you repay more capital the amount of interest you are charged goes down as you owe less, so the capital component increases and the interest component decreases. Hence you repay the majority of the capital quite late in the term.

Others do front load the interest, though the description above suggests the previous method.

This is common with most types of borrowing - for example i think it takes about 18 years to have repaid half the capital you owe in a mortgage.

jonesMUFCforever

It wasn't meant to be sarcastic.
She should have read the agreement and if there was anything on there that she did not understand she should have asked or taken advice then. It is too late now.
What Barclays have done (or those thieving scum if you prefer) is perfectly legal although I would suggest that most mainstream lenders today use the daily interest rate for Personal loans.
This one might be done under the old rule 78.