Northern Rock personal loan - now owe more than when I started!!!

coops53

Hi, hopefully there is enough experience here to clear this up for me...

In July 2005 I looked into getting a personal loan and eventually took out a loan with Northern Rock for £23,500 at APR 6.9% for 96 months. We signed the agreement on 1 Sep 2005.

Since then we have moved house twice and so have not seen a statement (ever, I think). So I rang up today to see what the balance was and found out that it is now £24,700!!! This is after paying £340 a month for the last 18 months.

I read somewhere that the rule of 78 finished in June 2005 so does that not mean the interest should not have been front loaded (as it obviously has been)???

Also I was intending to consolidate the outstanding balance into my mortgage when I remortgage in Mar 08 but I am loathe to lose the £6k I have already paid (plus further 12 installments) for effectively no gain.

Would appreciate any advice as the repayments of £340 a month are crippling us but do not want to just throw the money I have already repaid away.

To summarise:
1) Loan amount is now more than I borrowed - can they still do this? What is way ahead
2) Is remortgage best plan if cannot afford the £340? If not, what is?

nomoneytoday

If you settle the debt early SOME of this amount will be rebated.

However, for the first part of any loan you will usually end up owing more than borrowed as you have entered into a contract to pay NR interest for 8 years.

The real way to save £340 is to cut your outgoings, and join the debt free section of this board. Consolidating again won't solve the underlying issue...

Sorry

coops53

Ok, I think I get it now.

One more question:
The early repayment penalty of 1 month (or 30 days) interest is calculated from what? The start of the loan or the current balance?

e.g Do I take £23.5k x 6.9% x 1/12 (for 1 month) = £135

Or do I take the current balance of 24.7k?

By the way, is it me or is lumping your interest on top of your balance so that it appears far worse (I know it gets rebated) than it is, a really underhand tactic to scare consumers in to maintaining the loan, even if it is in their better interest to switch banks???

frugalpam

coops53 wrote: »

Hi, hopefully there is enough experience here to clear this up for me...

In July 2005 I looked into getting a personal loan and eventually took out a loan with Northern Rock for £23,500 at APR 6.9% for 96 months. We signed the agreement on 1 Sep 2005.

Since then we have moved house twice and so have not seen a statement (ever, I think). So I rang up today to see what the balance was and found out that it is now £24,700!!! This is after paying £340 a month for the last 18 months.

I read somewhere that the rule of 78 finished in June 2005 so does that not mean the interest should not have been front loaded (as it obviously has been)???

Also I was intending to consolidate the outstanding balance into my mortgage when I remortgage in Mar 08 but I am loathe to lose the £6k I have already paid (plus further 12 installments) for effectively no gain.

Would appreciate any advice as the repayments of £340 a month are crippling us but do not want to just throw the money I have already repaid away.

To summarise:
1) Loan amount is now more than I borrowed - can they still do this? What is way ahead
2) Is remortgage best plan if cannot afford the £340? If not, what is?

Have a read at http://www.financesurgery.co.uk/loan/rule78.cfm about the abolition of the Rule of 78. I'm clearly being fleeced by Citifinancial - read the thread here - and am seeking some legal advice about the settlement figure being quoted to me at the mid point of a 36 month loan.

Pam

nicecarkeys

You asked for the balance rather than redemtion figure. Call them back and f they should come back with a lower figure.