Have Halifax duped me or have I duped myself?

SeanyP321

Hey guys,

I had a Halifax loan, let's say for £10,000. I made about 5 repayments and then decided I needed to borrow more. Rather than renegotiate my existing loan, I took out an entirely new separate loan - again with Halifax - and paid off the first loan. This was partly because I am lazy and wanted to do it all online, rather than converse with a human.

Because of the way they calculate early repayments on long term loans, I ended up paying back almost exactly the same amount that I initially borrowed, despite my 5 hefty payments. This is an unconventional situation because I wasn't moving lenders - just borrowing more. Same type of loan, same terms, same lender.

I feel like I have an argument for saying 'my first loan was with you, by paying it off with more money I borrowed from you, all I essentially did was expand on the first loan, so why have those first five payments on the original loan just been gobbled up by the nothing? Surely some of that repaid interest should count towards my new loan?'

Does this make sense and is it a valid argument?

Thanks

19lottie82

this is called "front loaded interest". you have no argument unless this isn't detailed in the T&C's that you agreed to when you took out the loan.

next time don't be "lazy" and do some research before jumping in feet first to major financial decisions.

[Deleted User]

Although your monthly payments are split equally, you owe much more at the beginning of a loan than the end, so a much greater % of your monthly payments go towards interest.

The balance shifts over time as you gradually chip away at the capital, so at the end, your monthly payments are mostly coming off the capital, as there is so little interest.

SeanyP321

@19lottie Thanks for your concise, if somewhat uncouth response. I understand that it is called front loaded interest. How they calculate interest is not what is at question here though. I have no problem with how they calculate interest. It is whether I could (note: could - not entitled to) argue that the second loan is simply an extension of the first loan and therefore that front loaded interest should be applied to my new loan.

If I were moving to a new lender, or even a different loan with a better interest rate, I could understand that a lender would want to take a slice of the pie before I departed, but all I have done is borrow more money, which in turn is more money in the lender's pocket. The only reason they agreed to lend me the second amount was because I specified that I would be settling the original loan. Regardless of the Ts&Cs, it seems ethically ambiguous that the first five months of interest is applied to nothing, despite the fact that I have remained in a financial agreement with them.

Pixie5740

I don't think lenders are allowed to front load interest anymore. I very much doubt that is what Halifax is done in this case. I think it's as zx81 has described, there is more capital outstanding at the start of the loan so there is more interest being accrued.

Creditcardkid

As I read it, you have entered into two completely seperate loan agreements with the lender. They will see that as two seperate entities with no connection.

Sadly, the easy option of online application may have cost you a fair few quid.

Nothing you can argue with them about on this I cannot see. One to chalk down to personal experience I am afraid.

Steve

Thanks,
Steve.

SeanyP321

Thanks guys - front loaded interest seems a bit of a misnomer; as I understand it (and you have confirmed), all loans are front loaded to the extent that you owe more interest at the start of the loan than you do at the end.

Thank you Steve. That's what I thought. I get that I don't have a legal leg to stand on, but does nobody think it is worth sending a strongly worded letter to a customer care manager for a bank that I have been with for 17 years (never missed a payment and a bloody lucrative customer) and say:

"Look, I don't like talking on the phone, and I can't get into branch. I assumed that the website would be smart enough to figure out what I was trying to do, I made a mistake and it has cost me. Can you do a brother a favour and apply those payments to my new loan?"

Creditcardkid

It is always worth a try. I would try the softly softly approach though, something along the lines of..

"I made an honest mistake trying to consolidate my loan into a larger one but completely messed up the paperwork. I usually only deal online etc. Is there any way you could change this loan into a single one and save me a load of grief. I wanted to stay with your loans department as I have been a loyal customer for 17 years. Can you help me rectify this unintended error?"

Much more chance of them helping out if they feel sorry for you as I know that many call centre workers have various systems that they have to use that they mess up due to bad engineering and shoddy databases etc. If they can feel your pain as it were, much more chance of them sorting out something for you.

Good luck and let us know if it works.

ReadingTim

SeanyP321 wrote: »

does nobody think it is worth sending a strongly worded letter to a customer care manager for a bank that I have been with for 17 years (never missed a payment and a bloody lucrative customer) and say:

"Look, I don't like talking on the phone, and I can't get into branch. I assumed that the website would be smart enough to figure out what I was trying to do, I made a mistake and it has cost me. Can you do a brother a favour and apply those payments to my new loan?"

Well, if you don't ask, you don't get; but you should ask yourself why a profit making organisation would forgo some of those profits to subsidise someone who was unable or unwilling to do some basic research into whether the product they were applying for was suitable for their needs.

SeanyP321

I hear what you're saying. But there was once this concept, which has now become legend. I remember it, maybe you do too, but to an entire generation, it is nothing more than a whispered myth floating through the winds of time.

It was called 'customer service'

tomtontom

SeanyP321 wrote: »

I hear what you're saying. But there was once this concept, which has now become legend. I remember it, maybe you do too, but to an entire generation, it is nothing more than a whispered myth floating through the winds of time.

It was called 'customer service'

Customer service has never been about giving you money when you balls up. You are looking for a goodwill gesture. They might give you £50 to make your complaint go away.