Early Settlement - no reduction

Lou1973

Hi all,

I have had a loan with Natwest for around 5 years now and have recently contacted them to ask for a settlement figure. I have just received the paperwork and was shocked to see that they are offering no rebate for paying the loan off around 1.5 years early.

Why would I not get the interest on the loan for the 1.5 years back?
Is this normal? I've done a little reading up on paying off loans early and from what I've read a reduction off the remaining amount is quite normal.

I now am a little lost as to what to do. I have around 3k that I wanted to put towards the loan and there is 6k left but I'm kind of reluctant to put it towards paying off if I'm not going to get any benefits from paying early. I feel like this loan is going to be hanging around my head forever!

Thanks,
Louise

Gaz83

You say you asked for a settlement figure, but then you're only putting £3k towards an outstanding £6k?

Lou1973

That's now. I was intending putting more money towards it but expected at least 1k off of the current figure, or thereabouts.

jonesMUFCforever

Why do you expect a refund? You would only get this if all of the interest was front loaded - which all personal loans are not these days.


Check your loan statement - interest will be charged monthly.

Thrugelmir

Lou1973 wrote: »

Why would I not get the interest on the loan for the 1.5 years back?

Because you haven't paid it yet.

CLAPTON

Lou1973 wrote: »

Hi all,

I have had a loan with Natwest for around 5 years now and have recently contacted them to ask for a settlement figure. I have just received the paperwork and was shocked to see that they are offering no rebate for paying the loan off around 1.5 years early.

Why would I not get the interest on the loan for the 1.5 years back?
Is this normal? I've done a little reading up on paying off loans early and from what I've read a reduction off the remaining amount is quite normal.

I now am a little lost as to what to do. I have around 3k that I wanted to put towards the loan and there is 6k left but I'm kind of reluctant to put it towards paying off if I'm not going to get any benefits from paying early. I feel like this loan is going to be hanging around my head forever!

Thanks,
Louise

compare the settlement figure with the total payments left if you pay to full term :

the settlement figure should be less than the monthly payment x the number of payments left
this is what you save by repaying early

Lou1973

Clapton, thank you for giving me something that I can work on and try and figure out.

Jones, its not a refund, its less the interest that you would be charged if you had the loan to full term. Believe me, I have already paid off what I initially borrowed, plus interest.

I'm not someone expecting someone else to pay my debt - I could get an IVA for that. I've paid off what I initially borrowed, and some on top of that. I'm simply looking to pay off my loan early and try and save the interest that I may have accumulated over the 1.5 years left.

This is the information that I have read on almost every site that I have looked at (this taken from the Citizens Advice Bureau) and which is why I thought I may get some kind of early settlement figure that would be different to paying the full amount with interest each month for the entire duration of the loan. It could be that I've completely misunderstood the benefits of paying early, which is why I approached this forum:

If you want to pay off a loan early, under the Consumer Credit Act you should get a rebate of any interest and charges you’ve paid. To do this, you need to write to the lender and ask them to give you an early settlement amount for the loan. This is the total amount you must pay to clear the loan in full, including any rebate.

The lender must tell you the amount if you ask and allow you 28 days from when they received your request to pay the amount off in full. How much interest you have to pay depends on when you took out the loan and how much of it you have already paid off.

You don't have to pay off the loan just because you asked for an early settlement figure. You can carry on with your usual instalments instead.

If the lender doesn't answer your letter asking for an early settlement amount or if you think they are charging you too much, get advice from a specialist adviser.

nidO

If you want someone to do the exact working out for you, you'll need to let us know:

The current outstanding loan amount
The settlement figure (presumably the same as above)
Your monthly repayments
The exact number of months left on your loan agreement

Thrugelmir

Lou1973 wrote: »

Believe me, I have already paid off what I initially borrowed, plus interest.

With a loan that's a certainty. I suspect that you don't understand the mathematics of a loan agreement. Interest is not a fixed amount every month but is weighted towards the beginning of the loan then tapers away until it's very little when the last payment is made.

CLAPTON

Lou1973 wrote: »

Clapton, thank you for giving me something that I can work on and try and figure out.

Jones, its not a refund, its less the interest that you would be charged if you had the loan to full term. Believe me, I have already paid off what I initially borrowed, plus interest.

I'm not someone expecting someone else to pay my debt - I could get an IVA for that. I've paid off what I initially borrowed, and some on top of that. I'm simply looking to pay off my loan early and try and save the interest that I may have accumulated over the 1.5 years left.

This is the information that I have read on almost every site that I have looked at (this taken from the Citizens Advice Bureau) and which is why I thought I may get some kind of early settlement figure that would be different to paying the full amount with interest each month for the entire duration of the loan. It could be that I've completely misunderstood the benefits of paying early, which is why I approached this forum:

unfortunately the consumer credit act wording can lead to some mis understanding

under the CCA the lender MUST tell you the 'total cost' of the contract

i.e. monthly payment x number of payments = total cost of credit

when they then talk about rebate they mean on the interest left on the contract at the time you settle

I'v already given you the info to work it out approximately

jonesMUFCforever

OP you have not paid the whole amount of interest as per your CCA agreement yet ;for reasons in post #4
If you repay early you save by not paying the full amount of interest but there will be no refund due.
It does not matter if you think you have repaid the capital and interest already.