All the interest added on day one?

badgercolony

Got a Sainsbury's bank loan and they have added all of the interest to the loaned amount on day one of the loan. Therefore when I go to repay early (which they promote as a big selling point of their loans, although I think every company has to these days?), in effect i have to pay all of the interest for the whole period of the loan despite repaying early. Is this legal?

bigadaj

Are you sure, these type of loans normally simply have a penalty of a couple of months interest. So the tactic is usually to pay a large lump sum and then leave a regular payment to clear the balance with minimal interest penalty.

Might be worth quoting the exact clauses, they will often quote the total cost of credit but this is an illustration to point out how much it will cost over the loan period, I'd double check this if I were you.

Apples2

You need to ask for a settlement figure instead of assuming you are getting dry bummed.

CLAPTON

badgercolony wrote: »

Got a Sainsbury's bank loan and they have added all of the interest to the loaned amount on day one of the loan. Therefore when I go to repay early (which they promote as a big selling point of their loans, although I think every company has to these days?), in effect i have to pay all of the interest for the whole period of the loan despite repaying early. Is this legal?

No,

the regulations require lenders to show the total cost of the loan (i.e. the total repayments assuming to pay all the monthly payments until the natural end of the loan)

however, if you pay early then you only pay the capital plus interest to date plus a couple of month worth

bigadaj

Apples2 wrote: »

You need to ask for a settlement figure instead of assuming you are getting dry bummed.

What a lovely image.