front loading?

hogster2006

Last year I took out a £25,000 loan with Sainsburys...APR12%, I have not missed a payment and today I received my annual statement, the closing balance reads £26,871.11!
Reading further up it states "original amount of credit...£25,000" then "Statement opening balance....£32,903.40" this being the total amount payable under the original agreement, so my 11 payments of £548.39(total £6032.29) have been deducted from the opening balance hence the closing balance figure.
My other half had a similar loan from Barclays but her closing balance is significantly less than the amount she originally borrowed.
Is this what is often referred to as "front loaded interest" and is it still common practise (and legal) even with larger financial institutions like Sainsburys?
I intend to ring them on Monday for clarification but any ammunition I can gain from here first might be useful.
My statement does show "Interest" followed by "Instalment due" and then "payment received".... I had assumed that each payment would include interest but that the difference would reduce the loan balance....probably something in the small print that I overlooked!

PeacefulWaters

The balance on the statement is different to any settlement figure that exists.

Ask for a settlement figure before firing any ammunition. Otherwise you'll look silly.

Eonel

I agree with PeacefulWaters.

Sainsburys do not front load interest. The annual statement assumes the loan will run its complete term and is showing you the total amount of interest that will be payable.

If you were to ask for a settlement figure it would be lower amount as it would only include the interest that has been actually charged in the first year.

Do remember though that even with interest charged on a daily basis, the first year, where the loan balance is greatest, still incurs the most interest.

redpete

The monthly figures on the statement that you mention will show that the "installment due" is more than he "interest" figure - so that shows you how much of the balance you are paying off each month. Each and every month the interest will be less than the payment.

Different lenders show the statements differently - Sainsbury do not front-load the interest, they just give you the figure you have left to pay if you pay it off over the agreed period. If you make over-payments you will get a statement showing the new amount you owe - i.e taking into account the interest you will be saving.

Sainsbury are very flexible - you can make direct payments from you current account at any time and a few days later you get a new statement of what is owed. You end up paying the same amount per month but end up paying it off earlier.