Repaying loan early - zero rebate?

CLAPTON

thebritishbloke wrote: »

I would've thought that HP would be very similar to other loans now, with them being regulated by the CCA.

Wasn't entirely aware, thanks

sorry I don't known the rules for HP but although this is out of date it may be useful for ordinary loans

http://www.oft.gov.uk/about-the-oft/legal-powers/legal/cca/Earlysettlement#.U3jnhvldVa8

SeanG79

Its illegal to front load all loans, however when the banks show the outstanding balance, some show the balance if you ran the agreement to term. you should receive an interest rebate if the agreement is regulated by the CCA, so unless it was a business loan in the name of a regulated company then you should receive an interest rebate. Remembering that at the start of the agreement, your payments are mostly made up of interest and towards the end, your payments are mostly made up of capital.

DonaldtheMan

Could it possibly be part of a contract. I know for several loans I have used in the past, the interest amount in an early pay off will end up being part of an early term. fee that they charge.

Unfortunately for me it was outlined in the agreement which is why I read extremely thoroughly now.

Best of luck!

jonesMUFCforever

SeanG79 wrote: »

Its illegal to front load all loans, however when the banks show the outstanding balance, some show the balance if you ran the agreement to term. you should receive an interest rebate if the agreement is regulated by the CCA, so unless it was a business loan in the name of a regulated company then you should receive an interest rebate. Remembering that at the start of the agreement, your payments are mostly made up of interest and towards the end, your payments are mostly made up of capital.

Are you sure about this?
Most personal loans I know about, charge a daily interest rate to loans applied monthly - so there would not be a rebate would there?

danlightbulb

When the loan was taken out, the online banking showed the full amount of loan plus total interest over the term from day one.

From my point of view then, the payments of £199 a month have been linearly reducing the online balance such that at the end of the term it is exactly zero.

I thought this was how all loans worked.

I appreciate that the interest will be weighted towards the earlier years of the loan so it would not be linear, but I'd still expect some rebate with 11 months remaining.

Gaz83

At the start of my loan (£6,000) it showed my balance of £6,000 at the start. When I make my monthly payment by DD it reduces by approximately £90 each time although my DD is £116.

antrobus

The link below quotes a settlement figure of £2118; i.e a rebate of £71.
http://www.financecalcs.co.uk/Calcs/Settlement.php

danlightbulb

Hmm not much is it. Thought it would be a few hundred. Not sure its worth paying it off early, might be better keeping my savings.

Caz3121

danlightbulb wrote: »

Hmm not much is it. Thought it would be a few hundred. Not sure its worth paying it off early, might be better keeping my savings.

Interest is on the outstanding balance.
The first payment of £199 would have included £77.55 of interest
by month 50 the interest part of the £199 is £17.22 reducing month on month = the interest on the final 4 months total less than £16

http://www.theguardian.com/money/loan-repayment-calculator-interest-rates?view=classic

danlightbulb

The response I have had from HSBC says this:

"I can confirm that your initial Loan payments consist of a higher proportion of the Interest payable so there is no interest refund due in the last 12 months of your Loan agreement. I have requested a full Interest breakdown to clarify the calculation, this will be delivered to your home address within 7 working days."

I don't see how it can be correct though as even though the interest rebate from the calculator linked to above is small its at least something. HSBC are saying its nothing. I bet the interest breakdown I receive through the post doesn't put the next 10 months payments as containing zero interest.