Don't understand my loan offer...

Macoror

Hello,

I applied for a loan of £25,000 and I have a loan offer. The interest rate is higher than I'd like, but because I haven't lived in the UK for 3 years, I'm reasonably OK with it. I hope to be able to get a lower restructuring loan in about 6 to 12 months.

My questions is this: if I pay back the loan in full after one month (e.g. end of Jan 2017), am I still liable for the full £31,950? That would be insane for me and no way I would sign.

Am I borrowing £25,000 or £31,950? I only asked to borrow £25,000...

Maybe I'm just being paranoid, but can anyone here tell me from the below six page document which they're asking me to sign and send back?

Here is a redacted pdf:

uploadfiles.io/55849

I can't post links as I'm a new user.

The guy on the phone said that if I paid back in full at the end of Jan, I'd pay just over £25,000 - two months interest. However, how can I believe him? Surely it's what's written on the paper is what counts?

Nearlyold

You are borrowing £25,000. If you keep the loan running for the full term of the loan you will pay £31,950 in total as that includes all the interest you will pay over the whole term of the loan. If you pay the loan back early you will only pay interest for the time you have had the loan plus up to two months extra interest. Please note that you will be paying more interest per month at the start of the loan than at the end (because interest is charged on the outstanding balance). It is a legal requirement that loan docs show the Total Cost of the loan

Macoror

Hello,

Thank you for your reply.

OK, that's what I expected.

But how do I know for *sure* I won't be whacked with the full £31950 (minus the amount paid over 12 months) if I decide to settle in full after 12 months?

It's not clear from the document I got.

Nearlyold

Google European Consumer Credit Directive, or Early Settlement Regulations.

Your loan docs should give examples of early settlement figures of from memory 1/4 1/2 & 3/4 way thru the loan or something like that. You can see from those you wont be asked to pay the full cost of the loan. - This is all provided you are taking out a Regulated Loan of course.

jonesMUFCforever

Check your CCA agreement - does it not say how much you need to pay off at regular intervals?

Have not had a personal loan for years so haven't got one to check here.

Caz3121

Macoror wrote: »

I hope to be able to get a lower restructuring loan in about 6 to 12 months.

this may work with the same lender but with another lender they will see that you already have £25k of debt and are wanting another £25k so that would leave you £50k debt (there is no guarantee you will use the new loan to pay the old loan) so you will need a pretty high salary to be successful. (with the same lender they may require that they pay the existing loan at source so you never see the money)

~Brock~

Nearlyold wrote: »

Google European Consumer Credit Directive, or Early Settlement Regulations.

Your loan docs should give examples of early settlement figures of from memory 1/4 1/2 & 3/4 way thru the loan or something like that. You can see from those you wont be asked to pay the full cost of the loan. - This is all provided you are taking out a Regulated Loan of course.

Actually it was the Consumer Credit Directive that removed the requirement for early settlement examples to be included in agreements.

The agreement should confirm, however, that you are entitled to settle early and that any settlement figure will be calculated in accordance with the regulations.

The actual calculation is based upon an actuarial formula and is ridiculously complicated, however suffice to say that the rebate gets lower the longer the loan has been running.