Car finance concern

MrsD7913

Hello, in August I spoke to the company providing my car finance for the figures if I paid off a £2,000 lump sum, back then I was told my payments would be £77.21 for the duration of my finance. I had a baby in that time so my time was otherwise occupied so I have made efforts to find out what my new balance would be, thinking I've paid another 3 months since I spoke to them last, therefore my repayments would now be even lower but they have told me it will now be 29 payments of £85.40 and 1 payment of £212, when I queried it I got this response...

The interest remaining on the agreement drops as time advances. The rebate of interest therefore falls too.

As the interest remaining falls faster as you get closer to the end of the agreement so does the interest rebate due back.

The interest rebate that you get removed because of your overpayment is proportional to the amount of the overpayment compared to the sum outstanding. As time advances the £2k overpayment becomes a larger proportion of the remaining balance but it doesn't quite make up for the fall in the interest rebate.


A check we do to make sure everything is correct is to calculate the APR on the agreement that you have. We then recalculate the repayment after your overpayment to check that the APR is the same.

Can someone please tell me if this is right and maybe explain it in lamens terms for me please?

Sorry for the long post, help will be greatly appreciated?!

forgotmyname

Its like your credit card bill.

Buy something for xmas for £1000 @ 2% interest a month.

January you pay off £120. £20 of that was interest. So you still owe £900.

Repeat that for another 5 months paying £100 + the interest so you owe £400

Now you interest is only £8 a month and not £20.

Does that make sense? Your initial interest for the 1st 5 months would be £80, where the last 5 months will be £30.

OddballJamie

forgotmyname you really need to get a better credit card as yours is ripping you off.

Preferably one that calculates interest on a daily basis rather than every five months.

OddballJamie

OP could do with some more info on the loan to work out the figures.

Original amount, length, interest rate (APR).

MrsD7913

Hi forgotmyname yes that makes sense but why would my payments go up almost £10 a month with the larger payment at the end? I was better paying it off in August because doing it now means I'm paying more a month than I expected to be, even though I've paid off £492 since I last spoke to them?!

MrsD7913

Hi oddballjamie I can't for the life of me remember the apr but it was 60 months paying £164 a month so that makes approx £9,000, I think the car cost about £7,500 if any of that helps at all?

forgotmyname

OddballJamie wrote: »

forgotmyname you really need to get a better credit card as yours is ripping you off.

Preferably one that calculates interest on a daily basis rather than every five months.

Thats OK. My Halifax card is 0%. But i did get a pre-approved AQUA application yesterday at 39.9%. I was so tempted to apply.
What a status symbol eh an AQUA card..

One to flash around at the job centre when signing on


Thats going to be about 11 or 12%

OddballJamie

forgotmyname wrote: »

Thats OK. My Halifax card is 0%. But i did get a pre-approved AQUA application yesterday at 39.9%. I was so tempted to apply.
What a status symbol eh an AQUA card..

One to flash around at the job centre when signing on


Thats going to be about 11 or 12%

Aqua card sounds lovely. Is that like the football club fronted ones with the free club shirt in return for 40% APR?

OddballJamie

Looks like about 11.3% loan, so roughly if you've made 30 payments these are the figures:

[SIZE=-1]Your principal and interest payment is about: [/SIZE]£164.19
[SIZE=-1]You will make payments that total about: [/SIZE]£9,851.54
[SIZE=-1]Your payments to date total about: [/SIZE]£4,925.78
[SIZE=-1]Your interest charges to date total about: [/SIZE]£1,658.14
[SIZE=-1]You still owe on the loan about: [/SIZE]£4,396.55
[SIZE=-1]You have paid toward the principal loan amount about:[/SIZE]£3,103.45
[SIZE=-1]You have yet to pay interest charges totalling about: [/SIZE]£693.41

So if you were to make an over payment of £2000, this would reduce the outstanding amount to £2,396.55

Effectively you would then have a £2,396.55 loan at 11.3% over 30 months which equates to £92.07 a month.

If you have 29 payments left then the amount would be £2,273.76 making £89.96 a month.

These are rough figures from the information you've given me. No idea why they quoted you differently before.

MrsD7913

Thank you oddballjamie, my main concern is the random £212 they've plonked on the end but I'll speak to them about that. Thank you