Advice on HSBC Managed Loan

bozbear

Hi

This is the first time that i have posted and i am looking for some advice. Sorry if i have put it in the wrong forum etc. Here is the scenario:

When my partner got divorced he got in some money trouble and his bank were not very sympathetic (HSBC!) They told him that his only option was to lump his Credit Card, Overdraft and Loan in to a manage loan for £15,000 for 8 years. Paying back £250 per month (this would mean that he would pay back £24000)... Anyway the point is i have looked at his statements on the internet banking and they are charging £150 interest per month and after two years only £1000 has been taken off the total debt. So he is only managing to pay £100 of the capital off per month and £150 in interest. The debt now stands at £14000 so by my reckoning at £100 coming off the capital per month it will not be paid until 11 more years are up! And he was sold the debt over 8 years.

My personal opinion is that he should default on the debt let it go to debt collectors and then the interest will at least be stopped. I can see no other solution. He has also changed his bank from HSBC to A&L but HSBC will not accept standing orders from A&L as a means of paying the loan they say it must be tpaid through a HSBC account!

I am confused as to what to do next

CLAPTON

Its normal that the amount of interest being charged at the early stages of the loan is a high proportion of the monthly amount and the capital repayment only a relatively small proportion.
However, this should change as the capital owed falls and more of the monthly payment should go to reducing the capital and less in interest charged.

So if he is paying 250 per month then 150 in interest may be about right initially (assuming something like 12.9% APR ?) but that should have fallen after two years to about 130 and then should fall each month.

Did he take out any PPI type insurance that may explain the figures or has be missed any payments ?

Other wise i would ask HSBC to explain the figures and get confirmation that the debt will be paid off in full at the end of the 8 year period.

You need to post his full circumstances before we can give any specific advice about the way forward... suggest to him he posts his SOA here.

bozbear

Thanks for the advice. Basically at the moment after tax he earns £1600
the following is paid:

Rent £300
Elec £59
Water £36
HPI Car £333
HSBC £250
Finance on a caravan he owed with ex £120 (caravan now sold)
Credit Card £60
Council tax £87
Petrol to and from work £80
Phone £10
TV Licence £15

There is no problem keeping up with the payment it just confuses me the interest?:A