Quick loan question.

s1h

hazzie123 wrote: »

Give your head a shake.

I dont quite understand what you mean?

scottp_2

What is it with some people? They borrow money and expect to not have to pay it back in full with interest.

Of course, if you pay up early you shouldnt have to pay back the full amount of interest, as you are not borrowing the money over the same term, but you should have to pay back all the capital you borrowed. As far as i am concerned 'inmypocketnottheirs', they have just given you the full figure, then you have actually paid the amount with the interest rebate.

Theres MoneySaving and then theres taking the P**S

jamesd

s1h, when the banks get the money early they have eliminated the risk that you won't be able to pay in the future. That reduction of risk can make it attractive, particularly in the case where there is real doubt about ability to pay in the future. For longer terms and smaller payment amounts there's also the elimination of future administrative costs to consider and this could be very significant where a borrower is making court ordered payments that are at a very low level due to inability to afford more.

Those things can happen due to things like accidents that eliminate the ability to work and repay commitments that used to be affordable through no fault of the borrower.

These are just commercial risks that the banks take when lending money. They know that a certain percentage of borrowers are going to end up getting injured, dying or otherwise becoming unable to pay and allow for that in their interest rates that all borrowers pay. The same thing happens at Zopa where consumers doing the lending adjust the interest rates that they want based on the estimated risk of default of the particular market that they are lending to.

If you think that this affects the interest rates you pay you'd be correct. You can reduce the effect by choosing lenders who are as strict as possible in their acceptance criteria while still just barely being willing to accept you. Lenders that charge each person their own rate may also reduce the effect but you'll still end up paying the rates that are judged to be appropriate for a large group of people with your credit rating, not for you specifically.

Each lender decides what risk basket it wants to accept and sets its acceptance criteria and rates accordingly.

hazzie123

If I have a bank loan for 7 years and pay it for 3 years every month,then come into a postion where I can pay it off in one payment.Is it still fair for the bank to charge me the remaining 4 years worth of interest although I no longer have the loan.Also I have paid in one lump sum more than the orginal loan amount.

eatmyfish

scottp wrote: »

What is it with some people? They borrow money and expect to not have to pay it back in full with interest.

Of course, if you pay up early you shouldnt have to pay back the full amount of interest, as you are not borrowing the money over the same term, but you should have to pay back all the capital you borrowed. As far as i am concerned 'inmypocketnottheirs', they have just given you the full figure, then you have actually paid the amount with the interest rebate.

Theres MoneySaving and then theres taking the P**S

Quite right!!!

asandwhen

I think you will find that the figure you have been given is the outstanding amount and not the settlement figure anyway - You wont have to pay interest on money that you no longer owe - who is the lender anyway?

jonesMUFCforever

hazzie123 wrote: »

If I have a bank loan for 7 years and pay it for 3 years every month,then come into a postion where I can pay it off in one payment.Is it still fair for the bank to charge me the remaining 4 years worth of interest although I no longer have the loan.Also I have paid in one lump sum more than the orginal loan amount.

Bank personal loans do not work this way anymore and have not done for a number of years.
Most will charge daily interest (although there may be an early settlement charge max £250) if you pay it off after 3 years you do not pay interest for the whole 7 years.

hazzie123

ejones999 wrote: »

Bank personal loans do not work this way anymore and have not done for a number of years.
Most will charge daily interest (although there may be an early settlement charge max £250) if you pay it off after 3 years you do not pay interest for the whole 7 years.

Thanks for that,this is what I was meaning in my original post,but obviously never explained it well enough.

I was given a £13,500 figure which includes the remaining 4 years worth of interest.The discount what I was going to ask for was the 4 years interest to be taken off.I didn`t know that you didn`t have to pay it anyway.

Thanks for clearing that up for me.

So I will be paying what I owe left on the bank loan,just without the 4 remaining years of interest.

regularsaver1

hazzie123 wrote: »

If I have a bank loan for 7 years and pay it for 3 years every month,then come into a postion where I can pay it off in one payment.Is it still fair for the bank to charge me the remaining 4 years worth of interest although I no longer have the loan.Also I have paid in one lump sum more than the orginal loan amount.

no its not fair to charge the remaining 4 years interest (think there are new rules about this too)

however, what is fair is if a customer owes £15k (settlement figure) that they pay £15k rather than ask to settle on £13k simply because they don't want to repay the remainder

jenni1188

I have read your posts and i think your wrong about not being able to pay loans early. They make enough out of everyone to let a few people off a little bit of intrest!
As long as they pay the amount they owe plus it is a little encouragment for the banks to get there money back.

Overpayments and paying off in full is BRILL

As for you who dont agree, its not your money your lending, it's the banks so put up and shut up or give some proper advice!