Log Book Loan Help Needed

AndyF73

Hi

I need some advice on a logbook loan I took out with Mobile Money.

I borrowed £700 on the 15th March 2012 and have made the following payments:

16th April - £400
28th May - £250.

I rang up today and was told that interest is added at £77 per month regardless of the balance outstanding. The question I have is should the amount of interest decrease as the debt is paid off?

They are saying interest is calculated as follows:

Principle borrowed
£700.00

Interest due 15th March
£77.00

Interest due 15th April - Paid £400 on this date!
£77.00

Interest due 15th May - Paid £230 on the 28th MAy
£77.00

Documentation fee
£30.00

Total due payable
£961.00

Less payments made
£630.00

Settlement
£331.00

Many thanks

bargainbetty

Read ther terms of the agreement you signed - is that what you agreed to pay back?

I'll admit, it should decrease with each payment, but that's for a bank loan. Log book lenders have a nasty habit of creating theri own rules and making you stick to them because you need the money.

Read your agreement carefully - see what it says about interest rates and application.

AndyF73

All the pre-contract states is that the rate of interest is 132% fixed for the duration of the agreement ...

Edit - Just got off the phone and they are saying that the interest is front loaded so any rebate is calculated based on that; it's confused me and does not seem correct at all ...

Fiddlestick

AndyF73 wrote: »

All the pre-contract states is that the rate of interest is 132% fixed for the duration of the agreement ...

Edit - Just got off the phone and they are saying that the interest is front loaded so any rebate is calculated based on that; it's confused me and does not seem correct at all ...

What do your terms and conditions state?

gingeralan

It sounds like what they have done is work out how much you will repay in total including the interest then essentially capitalised this as the new amount owed.

If you were to have borrowed £700 over 10 months at £77 per month, the total repayable is £770, so even if you decided that you wanted to repay the loan the day after it started you would need to pay them £770, occasionally they may offer a token 'rebate' but this is usually a minimal amount. The have basically done this so that the first amount you will pay off is the interest, so in this example after your first payment the balance would only drop to £693 even though you had paid £77. I think this is not against any regulations, maybe it is a bit rubbish, but the way interest is calculated and paid should be in your initial paperwork, may not be in the most clear form but it should be there somewhere.

Buzby

132% is usury - and I would expect there to be no reduction in interest until the principle sum is paid off. Their 'rebate' is on their terms so will be to their advantage. Whilst you might expect the interest to fall I don't believe this is supported by their terms.