Loan - Settlement

milenia

Hi,


I have a car loan that I want to settle but the final figure from the company looks way too high.


36 months - £9147.00 - £251.61 pm


I'm on my last year so officially there is 12 x £251.61 and final payment of 1 x £341.61 = £3360.93


As there is no interest due on the last year you would expect a reduction but I've been quoted £3088.63 so I save £280.


My interest in total over 3 years was £2323 so surely it should be higher than £280??? They added the interest on from the beginning so should I get back a third ie £700+


They just sent me a document to explain it and its totally wrong and over complicated on purpose I suspect.


Thanks for your help...


Paul

CLAPTON

what was the initial loan amount
what was the APR
how many payments have you made
was there any payment free months at the beginning of the loan

Apples2

Why do you say there is no interest due in the last year?
They always charge interest from the start, it doesn't mean it is front loaded.
They can charge two months interest if you settle early.

As the term nears it's end you will pay much less interest than you do in the early stages so there less to benefit from by settling early.

milenia

Hi,


The loan is front loaded, they work out the payments by adding the APR amount to it.


Original Loan - £6800 ish they front loaded £2323 so £9100+ / 36 months = £251


I've made 24 payments already, 12 to go and final payment.


APR was 19%.


Thanks


Paul

CLAPTON

milenia wrote: »

Hi,


The loan is front loaded, they work out the payments by adding the APR amount to it.


Original Loan - £6800 ish they front loaded £2323 so £9100+ / 36 months = £251


I've made 24 payments already, 12 to go and final payment.


APR was 19%.


Thanks


Paul

well, no, they don't 'front load' the interest :


what happens is that in the early stage of the loan you owe a lot of money so the interest is high


as you make monthly payments you pay off the monthly interest and a bit of the capital


so each month the capital owing reduces and so does the interest owed




so in the first month the interest owed would be


6,800 *19%/12 = 107.67 approx. and you would reduce your capital by about 251-107.67


after 24 payment you would owe something like 2800 with only 2-300 interest to pay


so overall it looks about right

redpete

milenia wrote: »

My interest in total over 3 years was £2323 so surely it should be higher than £280??? They added the interest on from the beginning so should I get back a third ie £700+

They work out the monthly payments as if you paid it back over the full 36 months - that's why it looks as though they add the interest at the beginning. What they actually do is charge interest each month based on how much you owe that month - so the amount of interest per month is more at the beginning when you owe lots than at the end of the loan when you don't owe much.