Settlement figure confusion on HP

yoshiyella

Hello All,

I have a car on finance (HP).

In December I requested a settlement figure and was quoted £6508 which was valid until December 31st.

In January I, again, requested a settlemt figure and was quoted £6404.

This means that my payment made that month, £104 went off the balance and the rest was interest.

I have again requested a settlement figure but have been quoted £6311.

This means that my payment made that month, only £93 went off the balance and the rest was interest.

To me this doesn't make sense - I was under the impression that all payments would start to increase what was taken off the balance and so the interest goes down each month even if just by the odd pence.

Does anyone have any ideas why it would have only taken £93 off the balance and not £104 or more?

Thanks, Simon

CLAPTON

maybe the interest depends upon the number of days in the 'month' and hence varies a bit

yoshiyella

Though this sounds plausible the current settlement figure goes upto 29th February so less days.

yoshiyella

Don't know if this helps but I was told the interest was front loaded.

SeanG79

There is no front loaded interest on HP agreements...
What the lender will do is add all the interest at the beginning of the agreement, but when you request a settlement figure, there should be an outstanding balance (including all the interest) and then a rebate amount (all the interest outstanding less 58 days interest) which is removed from total balance to give you the settlement figure.

The settlement figure is valid until your next payment.

If you apply for a settlement figure on the 5th of this month and the 25th of next, then you cannot compare how much interest and how much capital amount each payment was allocated to.

You can google calculators online that will show you each month the breakdown of capital and interest for each monthly paymeny...

yoshiyella

SeanG79 wrote: »

There is no front loaded interest on HP agreements...
What the lender will do is add all the interest at the beginning of the agreement, but when you request a settlement figure, there should be an outstanding balance (including all the interest) and then a rebate amount (all the interest outstanding less 58 days interest) which is removed from total balance to give you the settlement figure.

The settlement figure is valid until your next payment.

If you apply for a settlement figure on the 5th of this month and the 25th of next, then you cannot compare how much interest and how much capital amount each payment was allocated to.

You can google calculators online that will show you each month the breakdown of capital and interest for each monthly paymeny...

So if I request a settlement figure on the 5th and the 25th both will be valid until the next payment date, for example 29th Feb, but the settlement figures will be different as the 25th settlement figure has 20 extra days interest on top?

Sorry if I am sounding stupid!!

SeanG79

No they both wouldn't be valid. when you receive a written settlement figure, it replaces all previous ones and is valid for the period the lender advises (usually till the next payment date, but sometimes 7 days, etc.)

When you request all these settlement figures, why don't you ask the lender?

The HP agreement, if it is in your personal name is regulated by the Consumer Credit Directive and the Consumer Credit Act, so the lender cannot charge any more interest for early settlement than allowed in the CCD/CCA.

Not sure what you are hoping to get from regular settlement figures?

yoshiyella

SeanG79 wrote: »

No they both wouldn't be valid. when you receive a written settlement figure, it replaces all previous ones and is valid for the period the lender advises (usually till the next payment date, but sometimes 7 days, etc.)

When you request all these settlement figures, why don't you ask the lender?

The HP agreement, if it is in your personal name is regulated by the Consumer Credit Directive and the Consumer Credit Act, so the lender cannot charge any more interest for early settlement than allowed in the CCD/CCA.

Not sure what you are hoping to get from regular settlement figures?

A new addition to the family means I need a bigger car than this one!

I have asked the lender but they can't explain it other than telling me interest is front loaded, their words not mine!

Thank you anyways! I'll accept what they say even if it does seem illogical.