HSBC Loan

underwurlde

Hello everyone!

In May of 2015 I took out a £10,000 loan with HSBC bank. I was NOT able to remortgage and it was their LOWEST loan amount (I actually needed £5,000). The APR is 8.9% for a 5 year front-end loaded loan, costing £205.49 pcm (Not bad in my honest opinion).

To sort my finances out, I've sold the house I currently own and will be due to move into another home in about 2 months if things go well. As I am down-grading ever so slightly I will be unlocking approximately £25,000 after costs.

The outstanding amount on the loan as of November 2015 is £9.041.56, HOWEVER after speaking with HSBC, if I was to have paid it all off in November I'd pay less interest which is therefore £7911.13 to pay it off (thus recuperating £1,130.43 in interest payments).

Question if I may: If YOU had £25,000 burning a hole in your pocket, would you pay it off?? If you DID choose to pay it off, what, if any, are the implications of paying off such a loan early?

I'm 99.99% certain I will pay this HSBC loan off early, I would just like to get some feedback on this decision before I go ahead.

Thank you for reading,

Andy

tonycottee

underwurlde wrote: »

Hello everyone!

In May of 2015 I took out a £10,000 loan with HSBC bank. I was NOT able to remortgage and it was their LOWEST loan amount (I actually needed £5,000). The APR is 8.9% for a 5 year front-end loaded loan, costing £205.49 pcm (Not bad in my honest opinion).

To sort my finances out, I've sold the house I currently own and will be due to move into another home in about 2 months if things go well. As I am down-grading ever so slightly I will be unlocking approximately £25,000 after costs.

The outstanding amount on the loan as of November 2015 is £9.041.56, HOWEVER after speaking with HSBC, if I was to have paid it all off in November I'd pay less interest which is therefore £7911.13 to pay it off (thus recuperating £1,130.43 in interest payments).

Question if I may: If YOU had £25,000 burning a hole in your pocket, would you pay it off?? If you DID choose to pay it off, what, if any, are the implications of paying off such a loan early?

I'm 99.99% certain I will pay this HSBC loan off early, I would just like to get some feedback on this decision before I go ahead.

Thank you for reading,

Andy

First of all, there are no such things as front loaded loans. When you take out that loan, they may tell you the total you have to pay back, but the interest is calculated on the loan amount itself.

Yes I would pay it off early. 8.9% isn't a good rate in the current market - around 3% is good.

When you pay it off, don't do it all in one go. When I finished paying my loan early, I paid off everything minus one payment. Usually if you pay off a loan early, you are charged a penalty - normally around 60 days of interest I think. But if your final payment is scheduled, you won't have to pay the fee. But check the T&C's on your loan.

underwurlde

First of all, there are no such things as front loaded loans. When you take out that loan, they may tell you the total you have to pay back, but the interest is calculated on the loan amount itself.

Of course. I'm just repeating what I was told when I was in HSBC: Initial repayments pay off the interest first, which they called (I think) 'front-loaded'. I'm no expert though. The entire amount payable is £12,329.71, hence as of Nov 2015, with an inital payment of £205.80 plus 15 further payments @ £205.49 taken off of £2,329.71 = the outstanding amount quoted, i.e. £9.041.56. Thus. it's taken me this long to get shot of the interest amount of £2,329.71 plus a bit of the actual loan, hence the term they used 'front-loaded' made sense.

Yes I would pay it off early. 8.9% isn't a good rate in the current market - around 3% is good.

OK, 8.9% is rubbish, pay it off. My kind of thinking.

When you pay it off, don't do it all in one go. When I finished paying my loan early, I paid off everything minus one payment. Usually if you pay off a loan early, you are charged a penalty - normally around 60 days of interest I think. But if your final payment is scheduled, you won't have to pay the fee. But check the T&C's on your loan.

So, if I were back in Nov 2015 and I DID have the funds, pay off £7911.13 - £205.49 = £7,705.64 and let HSBC keep me on the hook for the remaining period of the loan paying £5 per month or whatever it is.
OR
If the T&C's allow, just pay it off.

Cheers tonycottee (have a 'thanks').

Andy