Secured loan early repayment charges

michael8626

Hi,

I am about to take out a loan for home improvements for £23k.

£155 (variable) over 240 months. The secured property will be a rental property after the work has been completed.

I aim to repay this loan within three years. How much approximately will the early repayment charges be? I have been told two months interest, is this correct?

I understand rule 78 is not applicable but I have read about early repayment charges and early settlement charges, are they the same?

I would like someone to clarify the situation please!

Thanks in advance

Michael

forgotmyname

Its whatever your lender charges.

Maybe worth shopping around. The lowest interest rate may not be the cheapest option if you can pay it off in 3 years.

Fresh batteries in the calculator, huge urn of coffee (extra caffeine), paracetamol and all the charges from all the lenders you can find.

jonesMUFCforever

What kind of loan is it?
A personal loan might well have 2 months interest charge for early settlement, a mortgage fixed rate might have a % charge depending on how early you settle + charges to take the legal charge off your property.

michael8626

Hi

Thanks for the replies, it's a secured loan.

I was really trying to find out the law or legislation regarding the maximum amount payable of early repayment / settlement charges for secured second charge loans ?

Thanks

Thrugelmir

michael8626 wrote: »

I was really trying to find out the law or legislation regarding the maximum amount payable of early repayment / settlement charges for secured second charge loans ?

Lenders are all regulated by the FCA. So the terms on offer will be legal.

michael8626

Thanks for that.

So in around three years time I would have pretty much the whole balance (£23k) left to pay plus two months worth of interest?

I'm just worried I would have the loan balance and a hefty amount of interest to pay?

Foxy-Stoat_3

michael8626 wrote: »

Thanks for that.

So in around three years time I would have pretty much the whole balance (£23k) left to pay plus two months worth of interest?

I'm just worried I would have the loan balance and a hefty amount of interest to pay?

Its whatever the credit agreement says, not what posters on a forum say.

Read the quotation and application form from the lender, it WILL be on there.

michael8626

Foxy-Stoat wrote: »

Its whatever the credit agreement says, not what posters on a forum say.

Read the quotation and application form from the lender, it WILL be on there.

Thanks.

I think my broker told me it equates to two months interest?

The agreement states 'you have a right to bring this agreement to an end at any time by making a payment to reflect your outstanding balance and all future monthly payments less a rebate calculated under a formula set out in regulations made under the Consumer Credit Act 1974'

Is that 'formula' a standard formula for all second charge lending?

Foxy-Stoat_3

michael8626 wrote: »

Thanks.

I think my broker told me it equates to two months interest?

The agreement states 'you have a right to bring this agreement to an end at any time by making a payment to reflect your outstanding balance and all future monthly payments less a rebate calculated under a formula set out in regulations made under the Consumer Credit Act 1974'

Is that 'formula' a standard formula for all second charge lending?

http://www.legislation.gov.uk/ukpga/1974/39/contents

Find the formula in that lot !!

Don't forget about the broker fees that would of been added to the loan and may not be taken into account in the Consumer Credit Act.

michael8626

Thanks for the link.

To save me from wading through all of it does anyone have a simpler and shorter definition of how the news legislation compares to the old Rule of 78?

jonesMUFCforever

michael8626 wrote: »

Thanks for the link.

To save me from wading through all of it does anyone have a simpler and shorter definition of how the news legislation compares to the old Rule of 78?

It will be in your loan documentation!