118118 settlement calculations?

abcdef1234

Hi,

Looking for anyones thoughts/help on the understanding of my 118 settlement figure calculations.

I needed a loan for 3000 to which I was accepted for and unfortunately couldn't get a loan from anyone else. Very frustrating when you know your worthy of payments but no one trusts you. Anyway I took it at APR 71.31% (OUCH, I know).

I have made 6 monthly installments of £233.40p totalling £1400.40p.

My Question is this and i'm prepared for the answer not to go my way. This is the chat, Is this right?

Your current balance is £4,201.20. If you settle this now there is an element of interest that will not be charged; this rebate amount is £1,242.31. This means your full settlement figure is £2,958.89. This settlement figure is valid for 28 days or until your next payment due date (29/03), whichever is earlier; after this date the figure would need to be recalculated again.

So I have paid £41.11p off my loan out of the £1400.40p payments received so far?

118 answer:

There is no specific ratio as the figure differs with each individual loan and takes into a number of factors such as amount borrowed, interest rate and length of term.
However, what I can tell you is that the early payments will be mostly interest and very little capital and as the loan goes on through the term the amount of interest collected will decrease and the amount of capital will increase, so the later amount of payments will be mostly capital

I would appreciate an opinion off someone who understands more than me how these things work and I already know not to go near an interest rate like this again.

Thanks in advance.

john1002

118 answers explains it that is how all consumer regulated loans under £25000 work, interest is front loaded, if you can afford to settle the loan I would or pay off as much as you can and reduce the term.

John

[Deleted User]

Interest isn't front loaded, you are simply charged more interest at the beginning as the capital is higher.

abcdef1234

Thanks for your quick responses. I think the front loading thing is probably what I missed as it said I owed them 5600 pounds straight away, even on my credit rating it said I owe 5600. Well it seems i'm stuck with it. I did a settlement calculator online with the figures given and it said I would probably have to pay 2400 to settle. I think its disgraceful but I signed a contract which will say all this somewhere whether I understand it or not.

Thanks again. Better get saving.

[Deleted User]

It's not front loaded. It's just daily interest charges on the amount owed. All loans work this way.

abcdef1234

Does front loading mean they add interest straight away because it says I owe them 4200 in my account, Fixed monthly repayments of 233.40. Loans I have had before this were not worked out in this way. Basically I have paid £6.80 a month off my loan from a £233 payment. Seems a lot higher than 71%.

When I put the figure into a standard loan settlement calculator it say I should be paying off around 60 a month with that interest rate so I can only assume it is front loaded. If in my head front loaded actually means what I think it is.

racing_blue

Back of a fag packet, that feels wrong to me.

If this was an interest only loan @ 71% APR, then your monthly payments would be ( 71% * £3000 ) / 12 which is £177. In 6 months you would have paid £1065.

But actually in 6 months you have paid back £1400. Which is £335 more than would be required to meet the interest payments alone.

So I would expect the principal to be reduced by £335, to around £2665.

Are there any early repayment charges or other charges?

abcdef1234

My thoughts exactly, it seems they just plucked a figure out of thin air and when I asked for their calculations they just say its different for everyone.

I have basically paid nothing off my loan.

Oh well, I have asked their customer relations team to get in touch to explain. Another payment has been made but hasn't cleared so soon as that does i'm going to ask for another settlement figure to see what the difference is (if any).

Thanks for your time.

Just checked my agreement.

Could this be the reason its so high?

You have a right to repay the loan early at any time in full or in part. To do so you must notify us by telephoning us on 0800 0118000 or 02920 893300 or writing to us at 118 118 Money, PO Box 515,Ashford, TN23 9RF. If you notify us of your intention to repay in full early, we will provide you with a Settlement Amount Quotation which is valid for 28 days beginning with the day aer the day on whichwe receive your notice.

We may charge up to 58 days' interest on the amount that you repay early. If we receive a partial settlement payment, unless we agree otherwise, the term of the loan will remain the same and we will notify you of your reduced scheduled monthly Payments. You must continue to make your scheduled monthly Payments until your loan has been settled in full.

Nearlyold

You are right it's the 58 day's interest charge on early settlement that's clobbering you - in conjunction with the massively high interest rate.
(NB. ZX81 is right it's not front loaded interest)

abcdef1234

Thank you all so much for your time,

I just needed confirmation they were correct as it all seemed very confusing to me.

I've just to bite the bullet and get on with paying it back as fast as possible. Lesson learnt.

Going to up my payments I think.

Nebulous2

abcdef1234 wrote: »

Going to up my payments I think.

That would very much be worth doing, as it will save you interest from there on in. From the condition you quoted you may not be charged the 58 days interest on part repayments.

They will then decrease your monthly payments, so you will need to notify them that you intend overpaying or making a separate payment every month. Accepting the lower payment will reduce the benefit of the overpayment.