HSBC loan. How much rebate if any if I end early?

*Vikki*

Hi all, hoping you guys might know my answer

Took out a HSBC loan Juky 2011 for £7000. Interest was upfront so applied to balance which was £811.92. So I owed £7811.92. At £216.99 per month over 36 months. Due to end July 2014.

I am working hard to pay it all off December 2012 this year.

So thats 19 months early I would be ending the agreement (1 year 7 months)

So I worked out that £811.92 interest divide by 36 months is £22.55 per month roughly.

So I have worked out I should get £428.25 rebate in December when I pay the last payment.

Is this right? I think this only seems fair? But when I called them a few months ago just enquiring about it they quoted then id only get a couple of hundred pounds back. Why? Anyone know.


Thanks in advance.

R_P_W

it has been a few years since I had a loan so not 100% up to speed with how it works now, but when I had mine there was no real rebate to pay back if you paid it off early.

Does the bank not lend you the money expecting a certain level of return for them? If they gave you the rebate what do they get out of it?

*Vikki*

Well as far as I would see they would have made £383.67 from me which I thinks enough! But can see what you mean. No one seems to really know and when I phone them up its too early for them to know as I dont end up speaking to the right department if you see what I mean.

chunkychocky

As you have more debt outstanding initially then there is more interest accruing on the loan initially. As you pay off your debt then the interest charge is on a lower amount. This means that most of the interest charge that they showed initially was for the interest due in the early days. It is not possible to just divide by 36 or whatever.

27col

*Vikki* wrote: »

Well as far as I would see they would have made £383.67 from me which I thinks enough! But can see what you mean. No one seems to really know and when I phone them up its too early for them to know as I dont end up speaking to the right department if you see what I mean.

What amount of interest you think is enough and what the lander thinks is enough are two entirely different things, unfortunately.

*Vikki*

Oh yeah I know I just meant thats the interest they would have made so would have made something out of me. So I guess the answer is they wont give me any interest back. Bad very bad.

ceminem

You do not get a rebate, but the total you will repay in total will be less than the total sum of the payments when you took out the agreement. Hence you will not pay the interest due on repayments that is calculated after the settlement. You cannot apply a method of apportioning the interest equally as the interest charges are higher in towards the start of the loan agreement as the rate is applied on a larger balance, similar to mortgages on capital repayment terms.

rtho782

I don't think front loaded interest is allowed anymore, I was under the impression that interest was usually charged daily.

Basically, your loan started off with a balance of £7000. Once your first payment came out of your account of £216.99, they added one months interest, took off the £216.99, and you then had a balance of say £6900.

You'll find that as you owe more at the start of the agreement you pay more interest per month at the start, once you get to the end almost all your payments are going off your balance.

See the following table for your repayments, how much they are paying off in interest and how much in capital. I've assumed 7.3% APR, which is close to your monthly payment.

        Month / Year   Payment    Principal    Interest    Total     Balance        
  
  Paid         Paid         Interest    
      Aug-11   £217.10   £174.52   £42.58   £42.58   £6,825.48       Sep-11   £217.10   £175.58   £41.52   £84.11   £6,649.90       Oct-11   £217.10   £176.65   £40.45   £124.56   £6,473.26       Nov-11   £217.10   £177.72   £39.38   £163.94   £6,295.53       Dec-11   £217.10   £178.80   £38.30   £202.24   £6,116.73       Jan-12   £217.10   £179.89   £37.21   £239.45   £5,936.84       Feb-12   £217.10   £180.99   £36.12   £275.56   £5,755.85       Mar-12   £217.10   £182.09   £35.01   £310.58   £5,573.77       Apr-12   £217.10   £183.19   £33.91   £344.48   £5,390.57       May-12   £217.10   £184.31   £32.79   £377.28   £5,206.26       Jun-12   £217.10   £185.43   £31.67   £408.95   £5,020.83       Jul-12   £217.10   £186.56   £30.54   £439.49   £4,834.28       Aug-12   £217.10   £187.69   £29.41   £468.90   £4,646.58       Sep-12   £217.10   £188.83   £28.27   £497.17   £4,457.75       Oct-12   £217.10   £189.98   £27.12   £524.28   £4,267.77       Nov-12   £217.10   £191.14   £25.96   £550.25   £4,076.63       Dec-12   £217.10   £192.30   £24.80   £575.05   £3,884.33       Jan-13   £217.10   £193.47   £23.63   £598.68   £3,690.85       Feb-13   £217.10   £194.65   £22.45   £621.13   £3,496.21       Mar-13   £217.10   £195.83   £21.27   £642.40   £3,300.37       Apr-13   £217.10   £197.02   £20.08   £662.47   £3,103.35       May-13   £217.10   £198.22   £18.88   £681.35   £2,905.13       Jun-13   £217.10   £199.43   £17.67   £699.03   £2,705.70       Jul-13   £217.10   £200.64   £16.46   £715.49   £2,505.06       Aug-13   £217.10   £201.86   £15.24   £730.72   £2,303.20       Sep-13   £217.10   £203.09   £14.01   £744.74   £2,100.11       Oct-13   £217.10   £204.33   £12.78   £757.51   £1,895.78       Nov-13   £217.10   £205.57   £11.53   £769.04   £1,690.21       Dec-13   £217.10   £206.82   £10.28   £779.33   £1,483.39       Jan-14   £217.10   £208.08   £9.02   £788.35   £1,275.32       Feb-14   £217.10   £209.34   £7.76   £796.11   £1,065.97       Mar-14   £217.10   £210.62   £6.48   £802.59   £855.36       Apr-14   £217.10   £211.90   £5.20   £807.80   £643.46       May-14   £217.10   £213.19   £3.91   £811.71   £430.27       Jun-14   £217.10   £214.48   £2.62   £814.33   £215.79       Jul-14   £217.10   £215.79   £1.31   £815.64   £0.00

Edit: not possible to have tables on this forum it seems, and I can't access google docs from work. Oh well!

redpete

*Vikki* wrote: »

Took out a HSBC loan Juky 2011 for £7000. Interest was upfront so applied to balance which was £811.92. So I owed £7811.92.

Doubt very much this is what they did. The £7811.92 is just the figure they give of how much you would have paid at the end of the loan period if you paid the monthly payments as agreed.

So I worked out that £811.92 interest divide by 36 months is £22.55 per month roughly.

You don't pay the same amount of interest each month. In the first month you pay interest for one month on £7000 with a little bit coming off the capital. By the end of the loan the interest is on the small amount of capital still owed with the majority of the monthly payment paying off this remaining capital.

Is this right?

No

I think this only seems fair?

But that's not what you agreed to when you accepted the loan.

But when I called them a few months ago just enquiring about it they quoted then id only get a couple of hundred pounds back. Why?

As someone else said, you do not get anything back, you just pay less in the first place.

Oh yeah I know I just meant thats the interest they would have made so would have made something out of me. So I guess the answer is they wont give me any interest back. Bad very bad.

Not accurate nor bad, just the way loans and interest work.