Confused over settlement figure

perdusys

Hi

I'm a bit confused over whether it is illegal to pay all interest up front on a loan

Have asked for a settlement figure on an unsecured loan only to be told it is the total of the remaining payments until March 2015.

Googling front loaded interest is confusing, and I know there is a difference between paying the interest for the month calculated at the beginning of the month. Elsewhere in this forum, it has been stated that it is illegal to charge interest for the whole period of the loan on settlement.

Hoping someone can help clarify for me.

regards
Liz

jonesMUFCforever

What does your copy of the loan agreement say?

Who is the lender what kind of loan is it?

How much did you borrow at what APR AND OVER HOW LONG?

National_Debtline

Hello there,

Here's a useful guide brought to you by Brighton & Hove Trading Standards:

http://www.tradingstandards.gov.uk/cgi-bin/brighton-hove/con1item.cgi?file=*adv0030-1011.txt

Hope you find it useful!

David @ NDL.

perdusys

Thanks, that sort of helps and sort of doesn't!!
It was an unsecured personal loan of around £6000 over 5 years, and is in fact my son's who took it out jointly with his wife to pay off a credit card. They have since split up and he has taken on the payments himself, and is looking for a way to reduce his outgoings. When they split up a year ago, he asked this company then for a settlement figure and was told the same thing. He doesn't have the original agreement, and for reasons I don't want to go into, he knows legally the loan is the responsibility of both of them but chooses to pay it himself. By my calculations there are 15 x £166 left to pay. I am merely trying to reduce his outgoings, he asked if they would extend the loan ( not the best idea)but they will not.
David, I have read this document on other sites, but am not clear if it implies that there should be a reduction in interest. I appreciate it is probably in the small print somewhere, but if it is illegal does that not make it an illegal contract?

National_Debtline

Hello again.

If the loan is repaid early then there should be a rebate. Do you know when the loan was entered into? Was it after the 31st May 2005? (I think it would have been) Who is the lender?

David.

National_Debtline

Based upon the presumption that the loan was taken out after May 2005, the settlement would be based upon the rule set out in the Consumer Credit (Early Settlement) Regulations 2004, have a look at the formula, it's pretty complicated: http://www.legislation.gov.uk/uksi/2004/1483/regulation/4/made

This calculator should be able to give you a rough idea of what they should be able to save:

http://www.financecalcs.co.uk/Calcs/Settlement.php

David.

perdusys

Thank you very much for your help

perdusys

Have just found out that the loan is from Moneyway. Would you suggest that we write to them and ask for them to confirm in writing that there is no reduction in the interest? Or, would they expect you to pay the total amount and then refund the overpaid interest?

perdusys

Interest Charging InformationInterest is charged from the start of your loan and the rate is fixed for the life of the loan. Interest over the life of the loan is calculated and applied at the start of the loan.

perdusys

Repaying your loan early
You have the right under section 94 of the Consumer Credit Act 1974 to repay early in full or in part. If you wish to pay any amount early you must give notice to us at Moneyway, One Arleston Way, Solihull, B90 4LH or telephone us on 0121 693 9106. Unless you repay in full, any early repayment you make will not reduce the duration of the agreement but, if you have given us notice of your intention to pay an amount early, we will recalculate the amount of the remaining monthly instalments.

Both from the Moneyway website.

iancrt

The loan is not 'flexible'. They basically calculate all the interest that will be charged over the life of the loan, added it on and your agreement is to pay back this total amount.
They cannot refuse you paying it back early, but they don't have to refund any of the interest they would have expected.

If its about reducing outgoings, making a part re-payment they will re-caclculate the remaining debt over the remaining term so this may work ok for you.

However I don't think you will see any goodwill with only 18 months of the loan left. There's only about £200 of interest left assuming they got the 7.9% rate.