Tesco settlement figure

TerryTorque

Evening,

Hoping someone will be able to offer their thoughts. I took a loan out with Tesco in April 2011 with a 5 year term. The total including interest was just short of £7,700. I have been making overpayment recently and will be in a position to settle at the end of the month.

I called today to get a settlement figure and was told that any interest rebate had been cancelled out by the early settlement penalty of 2 months interest and as such my settlement figure is exactly what I would pay if I carried on with my monthly payments of £127.45 until June next year with a final payment of 68 ish in July.

I wasn't expecting a great reduction but for the settlement fee to be exactly the same as the total of the remaining monthly payments doesn't seem right to me. Can anyone advise please?

stephane_2

If you have been making overpayments then that would have gone towards the interest first...not the capital, so the figure that you have been given might be right. You may want to ask them for a breakdown.

TerryTorque

Thanks for reply. I get a rebate on interest with every additional payment, statement sounds like a good idea. I reckon I'll part pay it, that way I should still get a rebate on some of it.

CLAPTON

No this doesn't seem correct but without the figures it's impossible to come to any conclusions.

When you make overpayments they go towards reducing the balance owing. An small charge for early payment may be made.


Do you actually have the early settlement figure in writing?

In any event as you presumably owe only a small sum now any saving will be small.

pheonixrising21

stephane wrote: »

If you have been making overpayments then that would have gone towards the interest first...not the capital, so the figure that you have been given might be right. You may want to ask them for a breakdown.

So what you're saying is that there is no benefit whatsoever in overpaying as you will always pay the same total amount? Its my understanding that an overpayment reduces the capital balance and therefore shortens the term. Payments remain the same but a greater proportion of this is capital compared to if the overpayment had not been made.

Early settlement charges should be limited to two months interest I beleive, so if the end date is more than two months away, a settlement figure should always be lower than the total amount if all remaining payments were made.

I would say get a full breakdown of the loan repayments and see if they tally.

pheonixrising21

stephane wrote: »

You're so full of yourself.....unbeilevable. You just talk for talking....but noting much comes out of it :rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:

OK, lets do the maths shall we?

£7000 loan over 48 months at 7.9% APR works out at £170.56 per month, meaning a total of £8186.88 to repay in total. Now, if a £1000 overpayment were made in month 12, would you still expect to pay £8186.88 overall? I wouldn't, I'd expect to pay less as I would expcet my overpayment to pay off the capital and not interest, therefore reducing interest. MSE's own calculator suggests it would be paid off 8 months earlier, with a total repayment of £7,939.

Unless, I have misunderstood you (or the OP), you are saying that you would still pay the full £8186.88 overall even if you overpay? If I have misunderstood, then I apologise...

CLAPTON

pheonixrising21 wrote: »

OK, lets do the maths shall we?

£7000 loan over 48 months at 7.9% APR works out at £170.56 per month, meaning a total of £8186.88 to repay in total. Now, if a £1000 overpayment were made in month 12, would you still expect to pay £8186.88 overall? I wouldn't, I'd expect to pay less as I would expcet my overpayment to pay off the capital and not interest, therefore reducing interest. MSE's own calculator suggests it would be paid off 8 months earlier, with a total repayment of £7,939.

Unless, I have misunderstood you (or the OP), you are saying that you would still pay the full £8186.88 overall even if you overpay? If I have misunderstood, then I apologise...

I haven't checked your actual figure but in principle you are correct and stephane is incorrect.

stephane_2

pheonixrising21 wrote: »

OK, lets do the maths shall we?

£7000 loan over 48 months at 7.9% APR works out at £170.56 per month, meaning a total of £8186.88 to repay in total. Now, if a £1000 overpayment were made in month 12, would you still expect to pay £8186.88 overall? I wouldn't, I'd expect to pay less as I would expcet my overpayment to pay off the capital and not interest, therefore reducing interest. MSE's own calculator suggests it would be paid off 8 months earlier, with a total repayment of £7,939.

Unless, I have misunderstood you (or the OP), you are saying that you would still pay the full £8186.88 overall even if you overpay? If I have misunderstood, then I apologise...

1)The total of the loan was £7700 including interest when taken out.
2)Loan has been repaid for almost 2 years now
3)Overpayments has been made. We do not know by how much.
4)As far as I know you repay interest first....then capital
5)And yes I doubt very much considering all the facts that he would get a huge discount.

And from my own experience....I recently repaid a loan almost 2 years earlier....I had been paying it for the last 2 years.....no overpayments made and the discount I got was just over £500.

CLAPTON

stephane wrote: »

1)The total of the loan was £7700 including interest when taken out.
2)Loan has been repaid for almost 2 years now
3)Overpayments has been made. We do not know by how much.
4)As far as I know you repay interest first....then capital
5)And yes I doubt very much considering all the facts that he would get a huge discount.

And from my own experience....I recently repaid a loan almost 2 years earlier....I had been paying it for the last 2 years.....no overpayments made and the discount I got was just over £500.

you are incorrect

any overpayment goes against the capital owed which in turn means the interest is then reduced.


the ways loans work is that each monthly payment goes
1. to pay that months interest
2. the remainder pays off some capital
so if overpayment is made then it all goes against the capital as the interest for that month has been fully paid.


in the following month the monthly interest is obviously less as one now owes less capital.

stephane_2

CLAPTON wrote: »

you are incorrect

any overpayment goes against the capital owed which in turn means the interest is then reduced.


the ways loans work is that each monthly payment goes
1. to pay that months interest
2. the remainder pays off some capital
so if overpayment is made then it all goes against the capital as the interest for that month has been fully paid.


in the following month the monthly interest is obviously less as one now owes less capital.

Ok...might got it wrong for capital/interest.....the fact remains that considering all the fact & as you said in previous post, discount would be minimal & not forgetting that he has been charged 2 months interest penalty for early settlement.