Loan Repayment & Interest Querie HSBC

dgraffham

Last year I took out a loan with my bank HSBC for £12,000. It was setup over 5 years with an interest rate of circa 15%APR (I havn't got the paperwork infront of me). But repayments are of £284.47 a month for 60 months

When logging into my online banking I could see from the beginning that the total I owed for the whole loan term + interest would be £17,068.

Over the past year I have made overpayments on my loan to the total of £3000 (where I will also continue to always make overpayments) and from the beginning of the loan I was led to believe that making overpayments would reduce the amount of interest you pay on your loan, and would reduce the amount of monthly repayments as a result of this.

This hasn't happenned however and as it stands my internet banking indicates (after doing the maths) that I still have to pay £284.47 a month until the entire £17,068 has been paid off.

Is there anything I can do about this? I havn't yet phoned the bank as I wanted to see if I could seek advice or some information elsewhere first.

I've heard recently that the bank might have wanted me to give them a months written notice in order to make an overpayment. But if making an overpayment could have saved me £1000's of interest, then I don't see how it will be fair for them to make me pay them those £1000's just for not sending a letter in the post?

Can anyone help at all?

Thanks
David

[Deleted User]

The monthly payments will stay the same, but they will cease earlier - both due to the reduction in capital and the lower daily interest.

ViolaLass

Talk to the bank- maybe the overpayments haven't been applied to the online balance?

dgraffham

I knew that the monthly payments would still be the same. But it doesn't seem as though I have saved on interest by making any overpayments? I always thought that not only would there be less monthly psyments due to there being less capital, but also even more less payments due to not as much interest being added on?

As I made the overpayments very shortly after taking the loan, it was almost like only needing a loan for £9000 and not £12000, so surely you wouldn't have to still pay the whole £5000 interest? Which is what I am doing.

I'm hoping I make sense.

[Deleted User]

Your understanding is right - I think it's just not reflected in your online view.

dgraffham

Thanks for the help! I'll get in touch with the bank and see what happens.... Fingers crossed I owe less than I thought. I've been trying to do the maths to work out exactly how much less it should be, but its hard to work out!

CLAPTON

the HSBC website says this about personal loans

Early Settlement
12. You are entitled to repay amounts due under this
agreement partially or in full at any time by giving us
notice. You can give notice in writing or by calling us
on 08457404404. It is necessary to pay all amounts
owed under the Agreement if you wish to terminate
the Agreement. Where you make any early repayment,
there may be a reduction in the amount of interest
you will have to pay. We are entitled to defer the early
repayment date by up to 28 days and to make a charge
equivalent of one month interest on the amount of the
early repayment.
Personal Loan
Terms and Conditions
hsbc.co.uk
Issued by HSBC Bank plc
Customer information: PO Box 6201, Coventry CV3 9HW
MCP43418 03/14 ©HSBC Bank plc 2014. All Rights Reserved.
Relaxing The

lee111s

I have a first direct loan and asked this question when I took out the loan as I expect to pay ot all back before the 5 years.

They advised that if I pay back the full amount (£12600 on a £11500 loan) earlier than the 5 years then theu calculate how much interest I have saved and then pay me back that saving, minus the 28 days interest they're allowed to chare (although you can get around this by paying off all but one month's loan amount and allowing the standard payment to clear the loan

dgraffham

After getting in touch with HSBC about this over the weekend.
They told me that the amount of interest I have to pay isn't affected by the early repayments, and that I have to carry on making my usual payments until all has been paid off.

So basically I will be paying 60 months worth of interest, even though I'm making regular monthly payments for only 50 months.

I still can't understand how this is right?

Anyone have any thoughts?

emmatthews

My understanding is that if you overpay then you will receive a rebate of interest after the loan is paid off.

I thought the whole point of overpayments was to minimise the cost of borrowing the money.

ViolaLass

dgraffham wrote: »

They told me that the amount of interest I have to pay isn't affected by the early repayments, and that I have to carry on making my usual payments until all has been paid off.

This bit doesn't sound right. I would call again and query it.