HSBC Loan Overpayment Issue

Tonberry

I borrowed a sum of money in March this year with the full amount of interest over 60 months added to the amount borrowed.

At the start of this month I made an overpayment of more than 50% of the amount borrowed sans interest.

I've called them to ask for a recalculation of the total amount owed but they're saying I'm not due anything back or a lesser balance.

How can this be? The loan product allows overpayments.

How can I be expected to pay £2600 in interest based on 5 years if I repay the entire thing in less than 1?

Tonberry

Just to clarify, the term of the loan has now been reduced but the total number of payments leff still includes and reflects the full £2600 interest.

Nearlyold

Before you made your overpayment did you contact HSBC and tell them you wanted to make a Partial Settlement? (you are supposed to do this), if not I suspect their systems have treated your overpayment as a payment in advance and thus not recalculated the loan. Incidentally they haven't added the full amount of interest its just shown that way for clarity, in terms of illustrating the total amount payable

Tonberry

They were indeed contacted via webchat and told me to make the overpayment via online banking as a transfer which I did.

They warned me that if I was to repay the full amount I would have to call them the following day to receive a settlement figure.

Nearlyold

Tonberry wrote: »

Just to clarify, the term of the loan has now been reduced but the total number of payments leff still includes and reflects the full £2600 interest.

Could you clarify where you have seen this info, is it from the formal recalculation HSBC have sent you (which they have to provide under the European Credit Directive) or is it looking online at your loan account?

It is a regulatory requirement that partial settlement results in an interest saving for consumer loans.

Tonberry

My online snapshot.

Could you quote this legislation so I can hit them over the head with it.

I've received sweet FA in the post.

lee111s

You will be money back. I suggest you call back and speak to someone on the lending team.

I had a similar conversation with a First Direct advisor who told ne ai wouldn't save any interest by overpaying (which makes no sense at all). When he called through to the lending department they confirmed what I originally thought in that if you clear tge loan early, they calculate how much interest you've saved and rebate you that amount.

ViolaLass

Have the monthly payments stayed the same? If so, and the term has reduced, then there's your saving.

Nearlyold

ViolaLass wrote: »

Have the monthly payments stayed the same? If so, and the term has reduced, then there's your saving.

I think the OP was saying that when he worked out the payments over the reduced term the only "saving" over the original Total Amount Payable was equivalent to the overpayment he made. It might be because the on line snapshot is not showing an actuarial recalculation but has simply deducted the overpayment from the original total amount payable

Could you quote this legislation so I can hit them over the head with it

Note to OP - just Google - "European Consumer Credit Directive"

nyermen

"Just to clarify, the term of the loan has now been reduced but the total number of payments leff still includes and reflects the full £2600 interest."

Something doesn't add up - logically if the term is less (less payments), and you're paying the same amount per month, you're paying less overall. Otherwise the amount to pay per month would have to go up.
I suspect HSBC haven't been correct on something, or perhaps the online account (if that's what you're looking at) hasn't reflected the prepayment yet.

This is also backed up by their comment of "if you want to pay it all off, call us", because in this case, they need to give you the reduced amount. This is the case with my HSBC personal loan, where the "balance remaining" is more than the settlement figure.
Btw, if you're an advance customer, you get 10% refund of interest in some cases at the end of the loan, not clear if a prepayment kills that option off.

Peter

Tonberry

Nearlyold wrote: »

I think the OP was saying that when he worked out the payments over the reduced term the only "saving" over the original Total Amount Payable was equivalent to the overpayment he made. It might be because the on line snapshot is not showing an actuarial recalculation but has simply deducted the overpayment from the original total amount payable

Could you quote this legislation so I can hit them over the head with it

Note to OP - just Google - "European Consumer Credit Directive"

Exactly that.

I'm going to call them again.