Tesco Bank loan.. early interest payments?

ef1888

hi
I took out a loan of £12000 with Tesco bank, plus interest it totalled to £15000 payable over 60 months. To date I have paying it off for 19 months at £250 per month, totalling £4750.
When I called for a settlement figure, they advised that i still had £10.250 outstanding on the loan and I would need to repay that amount as a settlement.
Surely this isn't correct, otherwise I have just paid outright the interest on the loan with no repayments on the original amount, Could anyone please offer advice on this?
Thanks

tonycottee

If the loan was for £12000 and you now owe £10250, how can you not have paid off any of the original amount?

Tixy

No that doesn't sound correct.
If you pay off early then you should end up paying less than the £15k.

After 19 payments your capital owing should be around £8765, to which they are allowed to charge 2 months interest, say £130, so it should be around £8895.

Have you got your original paperwork?

gazman100

tonycottee wrote: »

If the loan was for £12000 and you now owe £10250, how can you not have paid off any of the original amount?

Think what the OP is saying is the interest is apparently front loaded i.e. pay off over 60 months = 15k, pay off after 19 months is still 15k.

Obvious depends on the T&Cs that were signed but it's certainly unusual (and arguably unfair). Their website states currently interest paid on a daily basis i.e. not front loaded. I would certainly question it.

TadleyBaggie

Ran those figures through a couple calculators and that seems correct. Don't forget at the start of the loan the majority of the repayment is interest. Only when you get to the back end of the loan period does the amount paid off the capital in significant amounts.

TadleyBaggie

gazman100 wrote: »

Think what the OP is saying is the interest is apparently front loaded i.e. pay off over 60 months = 15k, pay off after 19 months is still 15k.

Except they are not saying that...they owe just over £10k.

gazman100

TadleyBaggie wrote: »

Except they are not saying that...they owe just over £10k.

I think they are! Loan plus interest over 60 months was 15k. After 19 months they've paid £4750 and have been quoted £10250 as an early settlement figure = 15k. Suspect actually they've been quoted the balance and not a settlement figure.

gazman100

TadleyBaggie wrote: »

Ran those figures through a couple calculators and that seems correct. Don't forget at the start of the loan the majority of the repayment is interest. Only when you get to the back end of the loan period does the amount paid off the capital in significant amounts.

Not sure I agree. My back of an envelope calc is APR of about 10%. Even if they paid interest on the full 12k for 19 months, they should owe about 9k I think.

CLAPTON

ef1888 wrote: »

hi
I took out a loan of £12000 with Tesco bank, plus interest it totalled to £15000 payable over 60 months. To date I have paying it off for 19 months at £250 per month, totalling £4750.
When I called for a settlement figure, they advised that i still had £10.250 outstanding on the loan and I would need to repay that amount as a settlement.
Surely this isn't correct, otherwise I have just paid outright the interest on the loan with no repayments on the original amount, Could anyone please offer advice on this?
Thanks

what do the T&Cs say
did you have any payment free months at the beginning of the loan?

argomatt

I have a tesco loan.
The way it works is the total interest payable is added to the loan amount at the start.
So for my £15000 loan, the opening balance was around £16500.
When I make an overpayment the appropriate amount of interest is credited back to the loan amount in the form of an "interest rebate". So my £500 overpayment actually reduced the balance by around £600.
You do have to tell them you want the payment to reduce the term though, otherwise they will reduce the monthly payments instead, which doesn't save you as much interest.

Matt.

ef1888

Thanks for all your advice. I can't find the original paperwork but I do remember in the t&c's it said something along the lines of you will pay most of the interest at the start of the loan. I should have taken more advice at the time before signing on the dotted line. However, it does seem a bit unfair so I'm gonna re question it. I'm aware that the balance and settlement figure are 2 totally different amounts and I defo asked for the settlement which was valid for 30 days.
I will let you know how I get on
Thanks again