Horrendous Settlement Figure off Welcome

Silvafox

Hi,

I'm currently remortgaging and I have a secured loan from Welcome Finace that will obviously need to be paid off as it is secured to the property. Got a settlement figure and its frightening compared to what we borrowed.

Have spoken to someone at CCCS and they've told me take the original agreement down to the CAB. Just wondered what the knowledgable people on this site made of the situation and whether I stand any chance at all of lowering the figure?

Here are the figures:

Loan taken out for £15k in November 2004

Secured via a Unilatteral Notice added to the land registry (which means they didn't need to get permission off my mortgage lender)

Taken over 10 years

Unsure of APR until I dig paperwork out, but the monthly payment is £426 per month

To date we haven't missed any payments at all any months that we have struggled, we still paid off the interest itself which was £318 per month.

In total up to this month we've paid around £10-£11k back.

Settlement is over £23k......

So if we pay the settlement then we've paid approximately £34k back for a £15k loan in just over two years.....

I've heard things in the press about huge amounts being paid back on loans like this. I'm not disputing the fact we took the loan out etc and am not trying to get out of paying, obviously, its just that £23k seems extremely unfair in comparison to what we borrowed.

I would be willing to offer £15k, equiavalent to the original amount, as full and final, which means they still would of made over £10k in just two years in interest.

Any advice? Is the CAB the best option?

Any use in calling Welcome and offering less as full and final?

Thanks.

peterg1965

That is absoutely horrendous! The APR must be absolutely huge, there must be a case here for you to contest the figures. CAB should hopefully provide the definitive advice.

Silvafox

peterg1965 wrote: »

That is absoutely horrendous! The APR must be absolutely huge, there must be a case here for you to contest the figures. CAB should hopefully provide the definitive advice.

When I get home tonight I'll update the thread with the APR. I 'think' it was 36% but can't be sure. It was, obviously, a means to an end at the time and thankfully those days are behind us now (apart from this wretched settlement figure). I assume its all to do with the Rule of 78, as I assume thats whats causing the giant figures? Will look for that too on agreement.

Its a VERY hard lesson learnt... and one reason I'm posting is to help others avoiding doing something as stupid as this.

peterg1965

Silvafox, I would also post on the Debt Free wanabee board as well, there may well be some useful advice and experience on there.

Silvafox

peterg1965 wrote: »

Silvafox, I would also post on the Debt Free wanabee board as well, there may well be some useful advice and experience on there.

... good idea, thanks for that. I'll put the thread on there too...

frugalpam

Silvafox wrote: »

When I get home tonight I'll update the thread with the APR. I 'think' it was 36% but can't be sure. It was, obviously, a means to an end at the time and thankfully those days are behind us now (apart from this wretched settlement figure). I assume its all to do with the Rule of 78, as I assume thats whats causing the giant figures? Will look for that too on agreement.

Its a VERY hard lesson learnt... and one reason I'm posting is to help others avoiding doing something as stupid as this.

The rule of 78 has been abolished for loans taken out after 31st May 2005 - see this article - but may still be applied for loans taken out before 31st May 2005
I'm currently trying to get a decent settlement off Citifinancial - another firm who should really be re-classified as loan sharks. They've ignored 3 letters off me in recent weeks, so it's now in the hands of my solicitor.

Pam

Silvafox

frugalpam wrote: »

The rule of 78 has been abolished for loans taken out after 31st May 2005 - see this article
I'm currently trying to get a decent settlement off Citifinancial - another firm who should really be re-classified as loan sharks. They've ignored 3 letters off me in recent works, so it's now in the hands of my solicitor.

Pam

Trouble is our loan was taken out November 2004.... I assume that means the Rule of 78 can still apply.

frugalpam

Silvafox wrote: »

Trouble is our loan was taken out November 2004.... I assume that means the Rule of 78 can still apply.

Sorry - yes. I'd omitted that from my reply, and had just gone in to amend it!

Pam

wardlaw

I am not 100% sure here, but what some loan companies do when you take out a loan, is ;-

They calculate what interest you WILL repay through put the term of the loan, then add it up front

When or if you, you redeem the loan, this interested is basically included in the calculation And somtimes a lump sum PPI has also being added and you got it, you pay interest on this figure also


Was this explained to you in full, when you took out the loan ??

Silvafox

wardlaw wrote: »

I am not 100% sure here, but what some loan companies do when you take out a loan, is ;-

They calculate what interest you WILL repay through put the term of the loan, then add it up front

When or if you, you redeem the loan, this interested is basically included in the calculation And somtimes a lump sum PPI has also being added and you got it, you pay interest on this figure also


Was this explained to you in full, when you took out the loan ??

It certainly wasn't explained about front loading the loan with interest. The PPI was shown as a lump sum on the agreement i think.

nomoneytoday

The contract was for you to borrow £15k and pay back £51120 over 10 years.
The APR is about 35%ish in my head.

Since you are asking to break the contract the rule of 78 is the method used to come up with this high figure, possibly combined with front loaded interest and payment insurance.

Most loans settled too early end up in this scenario.