Is it possible to get the Interest back on a loan?

Steff_white

I had a nationwide 3000 loan which was meant to be for over three years but I paid it all back just over a year! Is there any way of getting Back any of the interst money they charged me? It was only around £850

andyfromotley

If you paid it off early you should have paid less interest no??

jonesMUFCforever

You were charged interest on the amount borrowed for the time you borrowed it - there is no refund of interest due.
By paying early you have saved interest that would have been charged in year 2 and 3.

lee111s

jonesMUFCforever wrote: »

You were charged interest on the amount borrowed for the time you borrowed it - there is no refund of interest due.
By paying early you have saved interest that would have been charged in year 2 and 3.

Depends.

I have a loan of £11500 with first direct and the total amount owed on the loan was £12658.

They added the interest on at the start of the loan, however, I will be paying it off early. They have advised that if the loan is paid off early then they will refund me the interest I have saved by paying off the laon early.

Apples2

They have not added all the interest on at the start. they have told you what you are going to pay over the term of the loan.
Repaying early simply means you won't be paying the remaining interest which would have been applied if it ran it's course.
you are NOT paying only the interest at the start.

stator

Did you ask them for a settlement figure and then pay that? The settlement figure would have included interest up to the settlement date only.

lee111s

Apples2 wrote: »

They have not added all the interest on at the start. they have told you what you are going to pay over the term of the loan.
Repaying early simply means you won't be paying the remaining interest which would have been applied if it ran it's course.
you are NOT paying only the interest at the start.

So then explain why on my credit report is the loan amount showing at £12658 and the remaining balance at just under £12k?

I have spoken to first direct about it in the past and it is exactly as I have explained. If I want to pay the loan off now, I'd have to pay the full £11xxx of what is outstanding and they'd then issue a refund for the amount of interest I'd save by paying it off 4.5 years early.

Apples2

The figures are correct becuase that is what you owe, this is different from settling early.
From their own T&C's

ou can repay your loan in full at any time by first giving us notice. You can give notice in writing, by secure message or by calling us on 03 456 100 199. We will then give you a settlement figure.
It is necessary to pay all amounts owed if you wish to end the loan agreement with us.
Where you make an early repayment, there may be a reduction in the amount of interest you will have to pay and this will be reflected in the settlement figure.
We are entitled to defer the early repayment by up to 28 days and to make a charge equivalent of one month's interest on the amount of early repayment.

http://www1.firstdirect.com/1/2/personal-loans

I think you either mis heard, misunderstood or the advisor got it wrong. It would be far removed from normal to have to pay money (interest) you don't even owe before getting it back again.

lee111s

Apples2 wrote: »

The figures are correct becuase that is what you owe, this is different from settling early.
From their own T&C's

http://www1.firstdirect.com/1/2/personal-loans

I think you either mis heard, misunderstood or the advisor got it wrong. It would be far removed from normal to have to pay money (interest) you don't even owe before getting it back again.

They have misinformed me then. I was very clear in what I was asking as I will be clearing the loan early. It's irrlevant at the moment though. I'll ring up and sort it out at the time of making the final overpayment.

SeanG79

Some lenders show the loan on your credit report to be the "outstanding balance" to term, as if you defaulted, that would be the amount of the default

Nearlyold

lee111s wrote: »

They have misinformed me then. I was very clear in what I was asking as I will be clearing the loan early. It's irrlevant at the moment though. I'll ring up and sort it out at the time of making the final overpayment.

It helps if you understand how the loan works as you make your payments.


If you borrow £10,000 over 5 years at an APR of 6% you would have to pay approx. £1500 interest over the whole term assuming you were repaying the loan by regular monthly payments. The interest is not added to the loan at the outset though. The total cost of the loan is £11500 and your monthly repayment would be £191.66


At the start of the loan you owe £10,000


At the end of the first month you pay £191.66 reducing the debt to £9808.34.
The lender also adds the interest on £10,000 for 1 month
£10,000 x .5% = £50 so you now owe £9808.34 + £50 =£9858.34.


Next month you still pay £191.66 reducing the debt to £9666.68
The lender then adds interest for the 2nd month - £9858.34 x .5% =£49.29 so you now owe £9666.68 + £49.29 = £9715.97.


Next month you still pay £191.66 reducing the debt to £9524.31
The lender then adds interest for the 3rd month - £9715.97 x .5% =£48.57 so you now owe £9524.31 + £48.57 = £9572.88.


Each month until the end of loan the same calculation is made so that eventually the loan is cleared.


As you can see the interest payable each month gradually reduces because of the declining debt

If you ask for a settlement figure the lender completes a calculation as above and then adds up to 28 days penalty interest which gives you your settlement figure at that point


If you make any overpayment (rather than paying off the loan completely) this immediately reduces the amount owing, as a consequence this will either shorten the term of loan or if you keep the same term it will reduce the monthly payment - It is up to the lender whether they reduce the term or the payment, though in practice many offer both options