Is 30% APR too high a rate for an unsecured small loan??

ultimatefighter

Gaz83 wrote: »

Just out of interest OP, what was the guitar?

Ibanez UV77RE 20th Steve Vai 7 string.

ultimatefighter

PeacefulWaters wrote: »

Ring them up again and ask for an accurate settlement figure. Demand it in writing.

Please clarify:

If they're asking for £9k to settle after 14 months they've made a mistake.

The answer to your primary question is no. The correct rate is the one agreed to by both parties. While I'd have been seeking out a 0% credit card you chose an alternative. The 30% rate subsidises those sensible enough to repay the debt within the 12 month term.

You have a bizarre view of risk. The risk is you borrow £4,000 and don't pay it back. The guitar could be on stage with an ageing rocker or smashed to pieces in a hotel room. You could have done a runner, lost a job etc. the value of the guitar is irrelevant.

None whatsoever.

There is no front loading principle. A loan agreement will normally state a total amount payable. A loan statement may start with this as a balance and deduct monthly payments from it. But a loan settlement figure will be based on interest accrued on the (usually reducing) outstanding balance plus a modest additional charge of up to two more months of interest. Your particular loan agreement has an increasing balance in the first 12 months.

At 14 months I'd expect the settlement figure on your loan to be around £5,600 minus any payment made. I suspect the settlement figure of over £9k you refer to has inadvertently double counted the £4k borrowed. Or you've simply misheard the number 5 as the number 9.

0% interest is incredibly competitive. Banks are in the business of lending money. This is why they want people to borrow it.

Thank you for your response. Very much appreciated.

You said none whatsoever with right to court involvement regards rate. What about Unfair Terms 1999? Nothing?

£4500 borrowed
INtention was pay off before end of 0%. Missed by 2 months.
Not misheard, asked to clearly state whether 5 or 9. Was told 9.
Of course there is front loading on loans where by most of the first few payments are interest paid especially with car finance. Hence why after a month the settlement to settle a vehicle has you lose a load of deposit you paid if wanting to change.

I will ask for it in writing from them in a letter and report back here.

PeacefulWaters

ultimatefighter wrote: »

You said none whatsoever with right to court involvement regards rate. What about Unfair Terms 1999? Nothing?

What is unfair about it? 30% isn't way off beam for an unsecured loan for £4k. It wasn't a disguised rate. They even rebate 100% of all interest if you repay within the first year. So what would you put in front of a judge to persuade him that the contract is unfair?

£4500 borrowed
INtention was pay off before end of 0%. Missed by 2 months.
Not misheard, asked to clearly state whether 5 or 9. Was told 9.

Ask again.

Of course there is front loading on loans where by most of the first few payments are interest paid especially with car finance. Hence why after a month the settlement to settle a vehicle has you lose a load of deposit you paid if wanting to change.

I have explained it in my previous post.

Love the guitar by the way.

Gaz83

You're right in that payments at the front are mostly interest, but this doesn't mean front-loading.

As an example: let's assume that your loan of £4,500 became £5,850 when the 12-month period was up. Putting these figures into the MSE loan calculator shows repayments of £210 per month over the 48 months at an APR of 30%.

Your interest for the first month (assuming monthly compounding) would have been £5,850 x (30%/12) = £146.25. So your first payment of £210 would have left a principle of £5,786.25.

Your interest for the second month would have been £5,786.25 x (30%/12) = £144.66. So your second payment of £210 would have left a principle of £5,720.91.

And so on.

This is why a settlement figure should never be as high as what you'd quoted. It should include only the capital at the date of settlement plus they are allowed to charge two months' interest.

It definitely sounds like someone at BPF has given you duff info. Asking for it in writing is good advice.

PS nice guitar, although I'm guessing you're into heavier stuff than me!

redpete

ultimatefighter wrote: »

Of course there is front loading on loans where by most of the first few payments are interest paid especially with car finance. Hence why after a month the settlement to settle a vehicle has you lose a load of deposit you paid if wanting to change.

"Front Loading" is where all the interest for the whole duration of the loan is added right at the beginning and there are no discounts for paying off early. What you've described is just how interest works, whether for car finance or any other type of loan - when you owe a lot of money (at the beginning of the loan) you pay most interest, towards the end of the loan when you owe just a little then the majority of the monthly payment is capital repayment with just a little bit of interest.

BillJones

ultimatefighter wrote: »

Would I have a case at court to have the rate adjusted downwards and a recalculation based on unfair terms?

No, of course you would not. You obviously thought that the terms were fair when the money was advanced, and nothing has changed in them since then.

It is obviously not unfair to require that you honour the deal that you freely entered into.

jamesd

ultimatefighter wrote: »

You said none whatsoever with right to court involvement regards rate. What about Unfair Terms 1999? Nothing?

Nothing. You are being treated perfectly fairly, except for not being given a correct settlement amount, and the terms are not problematic. The rate isn't unreasonable and the fact that you missed the deadline for the period where they would have disregarded the interest is your problem, not theirs. They were perfectly willing to do that if you'd repaid within the time limit.

You're right that the interest part of monthly payments is higher at the start of a loan. This is just because more money is owed at the start. As the amount owed drops, so does the money amount of the interest even if the interest rate doesn't change. This is the way most consumer loans and all mortgages work. "Flat rate" car loans are the major exception and the way those are done roughly doubles the actual interest rate.

The reason people are disagreeing about front loading of interest is that that was permitted before all of the recent consumer protection laws. Under the front loading systems all of the interest due over the entire term of the loan would be calculated then all payments for the loan would go to paying that interest until it was all paid, with no capital reduction at all until after that. Under current laws even the first payment will do some reducing of the debt and this will gradually increase as a percentage of the monthly payment as the amount owed drops. Current laws also give a legal right to make extra capital payments - partial settlements - at any time, which wasn't required before either. Those full or partial settlements also have to eliminate the interest that would have been charged in the future, bar a few months for costs, while before it would have been permitted to charge all interest due over the whole loan term even if it was repaid in the first month.

BillJones

ultimatefighter wrote: »

This loan is for purchasing a non depreciating object yet unsecured. On a small amount there is hardly the risk necessary to recoup more than double the amount borrowed....

...Would I have a case at court to have the rate adjusted downwards and a recalculation based on unfair terms?

The above bit is quite sad to read. The risk, of course, is that you'd pay late, pay too little, or look to squirm out of paying what you'd promised in some other way, which is of course exactly what you are now asking about doing.

How on earth can you in one post downplay the lender's risk and also ask about a route to fail to repay the agreed amount?

forgotmyname

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