Paying off loan early?

iritchie

Hey guys,


Just a quick question;

I took out a loan with Nemo Personal Finance a few years back.
I now have 12 months left until its paid off, but would rather just pay it off early and save myself a little interest and take a monthly outgoing out of the equation.
However, when contacting them, they are looking to charge me the full amount (including interest until the end of the loan period) PLUS an exit fee of £250...

From what I've read elsewhere, I thought the most that could be added was 2 months interest on the current outstanding balance, to settle a loan early or have I got it wrong?

Any responses much appreciated.


Thanks.

debtcutter

You're correct that they can only charge 2 month's interest on today's balance as an early repayment figure, but I think that's only on loans written since 2008 - not 100% sure which month in 2008 it was, I'm afraid.

When did you take the loan out?

iritchie

I took out the loan in May 2008, so it's probably on the borderline if it only applies to loans since 2008...?

CLAPTON

what does you loan agreement say?
was it a secured or unsecured loan?

iritchie

It was a secured loan, and I can't find my original loan agreement, which doesn't really help matters...I do still have all the original paperwork somewhere, so will probably have to dig it out I guess.

If those terms are in the agreement then I guess I'm stuck with it, but it seems a bit ridiculous that I end up paying £250 more by paying off a year early...
I just remember reading the "2months interest" settlement charges on here a few times, so hoped that the same would apply to me.

iritchie

Hey guys, just a quick update;

I found the paperwork for the loan and there is indeed a "Security Release Fee" outlined in the terms, but it says that this fee only applies to loans which are NOT regulated under the Consumer Credit Act 1974 (I'm not sure whether my loan would be regulated under this act or not?)
Also, the fee is listed as £125, NOT the £250 I have been quoted to settle early now.
I questioned them about this, and they said that "as I live in Scotland there is a bigger fee, due to the differing property laws", but there is nothing in the terms to suggest this and it sounds like a bit of a crock to me...

As for the interest, I don't really know where I stand, there is nothing in the terms about interest from overpayments, only that I have to make a minimum overpayment of £500.
This will obviously apply as I intend on settling the loan, but not if it costs me more money than it would to let it run...

Anyone know about the Consumer Credit Act and whether there are only specific types of loan this applies to?

Thanks.

rtho782

If the loan is to a limited company or LLP, or over £25,000, the CCA doesn't apply.

iritchie

Ah well, none of the above apply to me, so that means I do fall under the CCA coverage, meaning I should have no exit penalties, according to my T's and C's....
I looked up the EC Consumer Credit Directive laws as well and they came into force in May 2008.
I signed my loan agreement at the end of May 2008, so I should fall on the right side of the fence for the rules to apply to me.

pheonixrising21

Can you make any sort of overpayment without penalty? If so, just pay off almost all of the loan, then continue with the monthly payments. The payments should either be reduced to pay off the remaining amount over the remaining term or stay the same and the term reduces. If you leave exactly one month's payment left this should mean you only make one more payment after the overpayment?