TSB Loan - Early Repayment

Gunner17

Hi Guy's,

I am looking for some help regarding a TSB Loan.

TSB will give me a loan for £7,000 that I will use to pay off 3 credit cards.

The APR is 24.4%

I know this is a high APR even tho my credit rating is good and HSBC has just given me a £3,000 over draft.

My question is as follows:-

If I take out the loan and then repay it after 6 months in full will I have to pay any front loaded interest?

I am not sure on what the rules and regulations are now on charges for paying of loans in full.

Cheers

PS - I also thought about applying for the 3.9% HSBC loan but I didn't want to run the risk of a decline (TSB'S is based on customer experience)

Tixy

If you repay early in full they can only charge you 58 days interest as an early settlement fee.

If you can pay in full in 6months then it may be worth trying to get a new credit card with 0% on balance transfers instead? And if declined you could always go for the tsb loan as a fallback option?

Gunner17

Hi Tixy,

This is what I thought - so in theory I make 6 payments at the agreed loan rate.

How do they calculate the 58 days interest? do you have the sum for this?

Cheers,

Tixy

It will be based on whatever the capital balance is at that date, and then using the APR.

Without knowing the term of your loan, or the monthly repayment at best guess it may be around the £270 ish mark.

Gunner17

Hi Tixy,

£7,000 to borrow at 24.4% is £240.70 per month over 42 months

Total £10,109.40

I assume that If I pay off after 6 months the sum is £10,109.40 less £240.70 x 6 (£1,444.20)

The balance would be £8,665.20 but I have no idea how to calculate the early settlement.

Tixy

Best thing is to put the figures in to a calculator like this one http://www.theguardian.com/money/loan-repayment-calculator-interest-rates

Then look at the capital outstanding at after month 6 payment (so on the month 7 line) £6324. Then you'll be adding roughly 2 x the interest in month 7 which is £129, so around £258.
So the amount you will need to repay at that point will be (approx) £6492.

The monthly repayments on that calculator are slightly different to yours, so the figures will vary by a small amount.

Gaz83

Gunner17 wrote: »

Hi Tixy,

£7,000 to borrow at 24.4% is £240.70 per month over 42 months

Total £10,109.40

I assume that If I pay off after 6 months the sum is £10,109.40 less £240.70 x 6 (£1,444.20)

The balance would be £8,665.20 but I have no idea how to calculate the early settlement.

Nah, that's not how it works.

If you borrow £7,000, then your first month's interest is £7,000 x 24.4%/12 = £142.33. So you'd be paying £98.37 principle and have a balance of £6,901.63.

Your second month's interest is £6,901.63 x 24.4%/12 = £140.33. So you'd be paying £100.37 principle and have a balance of £6,801.26.

After six payments you'd have a balance of roughly £6,382. 58 days interest on this would be £6,382 x (24.4%/365x100) = £247. So your settlement figure would be about £6,629.

All figures are rough!

Gunner17

Hi Tixy,

Thanks - I have just found that on an old post you did.... I will consider this loan and maybe apply for the HSBC one.

Basically I want just 1 repayment for 6 month's - in 6 month's I will be £1,500 a month better off as my TAX arrears will be paid off and I could then clear this loan in full (the interest is prob what I am paying on my credit cards anyway)

Thanks,
Gunner17

Gunner17

Hi Guy's,

I have a thought - does it still stand that if you pay the loan back within 14 day's then you would only pay the £7,000 lent?

Thanks,
Gunner

Tixy

If you cancel a finance agreement within 14 days of accepting it then you only need to repay the capital plus any interest that has accrued between the day the money was paid to you, and the day you repay.

You need to specifically cancel the agreement, not just repay the money borrowed.