Bank says I am in arrears with my loan repayments.

rtho782

auntmay wrote: »

Paying the loan off early has to be requested by me and agreed by the bank. I am happy with the repayment schedule and never requested an early settlement. Can one be forced on me?

If you're happy with the payment schedule you should be keeping it up and making the monthly payments as agreed. What you are asking for is a payment holiday based on previous overpayments. My mortgage does this, but it sounds like your loan does not.

The agreement will almost certainly say that overpayments (which are any payments in addition to the scheduled ones) shorten the term, they do not allow for payment holidays.

auntmay

Right I understand that now. My next question is, should they have made the refund into my loan account? The refund was for errors they made on a previous loan which had been paid off, nothing to do with this loan.

rtho782

I would feel that, assuming the two loans were not linked (the new one was not an extension/additional borrowing to the first for example) they should have given you the cash.

Dobbibill

auntmay wrote: »

I took out a loan a few years ago when I was employed. The final repayment is due in mid 2017.

I never missed a payment until I lost my job in July last year. Then in November the bank refunded nearly £3000 into my loan account due to some error that came to light on their part. This more than covered the missed payments and brought the balance remaining to under £1000.

auntmay wrote: »

The refund was for errors they made on a previous loan which had been paid off, nothing to do with this loan.

You were in 4 months of arrears when the payment was made. I suspect is was a business decision that the payment was going to pay off the existing loan.

Lioness_Twinkletoes

If you had an agreement in place to pay the ongoing loan and hadn't defaulted you could have requested they pay the £3k directly to you. As you did not, then they were entitled to use it to clear the lion's share of the loan you had defaulted on.

auntmay

Was it their decision to make? The money was mine which they should not have taken in the first place so shouldn't I have been the one to decide if it goes to the existing loan or not? I would have got the loan up to date and could have kept it up to date for another 8 months if they had given the money to me.

Nebulous2

Banks operate something called 'right of offset' which means if you owe money on one account and have cash in another they can use one to pay off the other, so they probably can put it towards your loan.

To elaborate on overpayments, banks have to allow them now and often ask whether you want to reduce the term or the monthly payment with the extra money. Stopping paying until it catches up isn't an option I have ever heard of.

auntmay

Had they only taken an amount to cover the missed payments I would be up to date with payments today and still able to pay the next 8 months. Seems odd that a month after the big refund they gave me another £200 refund for a similar error but this time they sent me a cheque instead of paying it into my loan account.

joeyjimbles

I'm not a loan expert, and clearly other people have experience that they have shared with you. I would put your points to them in writing and see what they say. Since they made two separate payments in different ways there may be a case to be made that they are being inconsistent, though that quote about offsetting may well be their response to that.
Its got to be worth a letter on your side, and at least you will then be in correspondence with them so you could negotiate something. Hope you get it sorted.

undaunted

The above seems sensible enough to me. If you feel aggrieved write to the bank and set out your case - EG








I took out a loan on ........... for £ ........... Payments were to be £.... p/m meaning that as of today I should have repaid £...... I lost my job and fell into arrears of ........ However, a £ payment was then made to me by the bank by way of compensation for ............... (and equating to .... x months payments). I therefore consider that I am currently ...... ahead rather than in arrears. Had you made the payment to me by cheque, as you did on ..... I would have been able to fund .... months repayments and would not therefore be in arrears, hence I feel it unfair of you to suggest that I remain in arrears because you took my compensation money and applied it directly to the loan without any discussion with me and yet now seek to discount it as a valid form of payment. and then see what they say in reply. You have little to lose - other than perhaps a few months arrears and a little time to write it if they accept your argument. Even if they don't you've lost nothing.