Loan cancelled - charged a penalty?

[Deleted User]

Hi,

I had a 5-year term loan with Lloyds TSB and, because my circumstances changed, decided to pay it off after a year.
This cancellation cost me the additional interest since my last direct debit payment, but an additional £140-ish for the early settlement.
I can't see this charge specified anywhere in the agreement, other than "You can settle this agreement in full at any time by giving us notice and paying off the amount you owe. If you wish to settle early you should contact us for a final settlement figure."
I did (it doesn't specify how much notice, but I can do so in writing, by email or telephone) and it cost me.

Is this a legitimate charge?

The original loan was for £19,829.00 with 12 monthly payments of £410.43 made and I haven't missed any payments. The settlement figure is £16,844.22

Thank you

jonesMUFCforever

I think you will find on there somewhere a clause saying they will charge up to 2 months interest with a maximum of £250.
It is a legitimate charge.

[Deleted User]

Hmm,

I have looked through both the summary and the detail - more than once - and couldn't find anything, but it's been a long day!

I appreciate it would be legitimate if written in, but I don't want to just roll over if I don't have to :-)

[Deleted User]

its how most loans work if you repay early,either one or two months added interest

InsideInsurance

It does depend on what you are trying to achieve. With some you can pay most the loan off and get the remaining repayments calculated based on the same loan length. That was you avoid the early settlement fee and reduce the total payable but still have an open loan for the remainder of the term.

[Deleted User]

Erm, this might be worth a mention...

I made a 'formal complaint' (prompted by the person I was speaking to when cancelling the loan) and I received a call from the bank this afternoon.

They've cancelled the charge as a gesture of goodwill and will transfer the amount to my current account!

:T:D:T

fozmcfc

Well done to Lloyds TSB on giving a gesture of goodwill, despite the fact I don't believe you have any complaint anyway. Prehaps they see you as a valuable customer, although loyalty certainly counts for nothing most of the time with banks.

Anyway, just to be clear, this isn't a loan cancellation, this is an early settlement of a loan.

For early settlement there is usually a charge, I think with Natwest for instance it was 56 days interest.

As insideinsurance says, where possible people should pay all but 1 months payment, then when the next payment comes out the loan should balance should be at £0 with no extra charges.

[Deleted User]

The (very nice) lady did say it was in the text of the agreement and gave the paragraph number to confirm it, but also acknowledged it wasn't written very well - hence the goodwill payment.
I started looking in to this because my son has just paid off his loan with HSBC and they didn't (appear to) charge him for the early redemption, so I just asked my bank.
To be honest, I was considering changing banks because Lloyds isn't very highly rated and, because I am grumpy by design :j was on my way. I didn't say this at the time, but their response has made me feel quite humble :silenced:, so I'll probably stay for the time being

Macca83_2

A bank of Scotland loan agreement states that they may charge an early settlement charge of up to 56 days interest. As part of Lloyds banking group this clause is probably pretty common across the 3 brands.