Citifinancial loan

frugalpam

I took out a loan (foolishly) with Citifinancial Europe PLC around 18 months ago - exorbitant rate of interest, but they knew I was desperate. I am now in a position to settle the loan, but the resettlement figure they have quoted is, in my opinion, way too high. I am planning to settle the loan just after the midway point.
I have asked them for a detailed breakdown of how they have arrived at this figure, and given them the figure that I feel is realistic (having studied how much I have paid off the credit (the original loan amount) and the interest charge.
If they refuse to budge on their settlement figure (which I feel is likely), should I take it up with the FSA?

Any advice most welcome

Pam

tom188

What is the rate/term of your loan.

If youve had the loan only 18 months the chances are you have actually repaid only a miniscule amount of what you owe - the early payments exist almost entirely of interest and the interest component decreases slowly through the period of the loan. Have you read the terms and conditions to see what the redemption penalties are?

frugalpam

tom188 wrote: »

What is the rate/term of your loan.

If youve had the loan only 18 months the chances are you have actually repaid only a miniscule amount of what you owe - the early payments exist almost entirely of interest and the interest component decreases slowly through the period of the loan. Have you read the terms and conditions to see what the redemption penalties are?

I've paid off around £840 of the £2600 credit (the original loan amount) and £797 of the finance charge of £1200. The loan was taken out over 36 months, and I am planning to settle at the half way point, which is next month. Yes, £1200 in interest on a £2500 loan!! I can't just locate the agreement - I need to dig in my files for that, but I'll certainly look into what their redemption penalties are. Heaven knows what APR works out at, but it's exorbitant. I must have needed my brain examining, agreeing to that - but as someone with a poor credit history, I was desperate. I've paid the price for getting in debt, but I don't like the feeling they are now trying to rip me off. They're asking for around £1900 as a settlement figure at the half way point of the agreement

Pam

Edited to add: having checked out a BBC link and done an online check of my agreement with Citifinancial, it looks like there are inaccuracies in the agreement which means it may not comply with Consumer Credit Act Regulations. I'm looking into how I can deal with that.

nomoneytoday

You agreed to pay Citi £1200 in interest over 3 years.

By paying this off you early this means that Citi won't make as much money from you. To compensate for this there is a formula called the rule of 78 which will work out how much is owed.

What this means in reality is if you cancel a loan early, the amount owed is nowhere near a prorated amount.

frugalpam

nomoneytoday wrote: »

You agreed to pay Citi £1200 in interest over 3 years.

By paying this off you early this means that Citi won't make as much money from you. To compensate for this there is a formula called the rule of 78 which will work out how much is owed.

What this means in reality is if you cancel a loan early, the amount owed is nowhere near a prorated amount.

Maybe so. Anyway, I'm written again for a detailed breakdown of how they arrived at that settlement figure - I've still got a feeling I'm being fleeced. It seems also that there were discrepancies in the credit agreement, so I'm taking some legal advice. I've been screwed by banks for unlawful penalty charges (which I'm reclaiming) and I'm blowed if Citifinancial are going to fleece me as well. Makes me sick to think how these institutions make money off the back of people

Pam (getting off her soap box.... feeling grumpy today)

frugalpam

nomoneytoday wrote: »

You agreed to pay Citi £1200 in interest over 3 years.

By paying this off you early this means that Citi won't make as much money from you. To compensate for this there is a formula called the rule of 78 which will work out how much is owed.

What this means in reality is if you cancel a loan early, the amount owed is nowhere near a prorated amount.

I took out this loan in November 2005. I have just found this information at http://www.financesurgery.co.uk/loan/rule78.cfm which states that Rule 78 has now been abolished for all loans taken out from 31st of May 2005

Rule 78 abolished - Loans taken out from 31st May 2005
Rule 78 has now been abolished for all loans taken out from 31st of May 2005. Changes to the Consumer Credit Act have been made to ensure consumers get a fairer deal and have the following implications on the early repayment of loans taken out from 31st of May 2005:

1. The lender cannot charge more than 28 days penalty interest on a loan that is being repaid early
2. Lenders must now calculate the actual amount of saving a customer makes by repaying early this is called the rebate.
3. When customers take out the loan they must be shown the amount payable at quarter, half and three quarters of the way through the loan. This can be the exact figure or representative based on how much per £100 / £1000. These early repayment amounts must state that they are illustrative only and don't account for any variations.
4. Requests for early settlement quotes must now be actioned within 7 days
5. If extra insurances such as PPI or GAP have been sold as part of the loan, then they must also be factored into any early repayment quote. If they are sold as separate contracts then they must be calculated separately.

According to (4) Citifinancial have got 7 days to action my request for a settlement figure which they did not do. All in all, I think they are on sticky ground with the settlement figure they originally quoted to me. They clearly applied the Rule of 78 which was not legal with respect to my loan - I found a rule of 78 calculator, and the figures were clear to see.

I hope this information is helpful to anyone else wanting to settle a loan early.

Pam