Something seems dodgy about this?

Rosie1978

Hello,
I need some more advice and would be grateful if anyone could help. Without giving too much detail, my DB took out a loan for £19k ten years ago with exp.
They since split, exp has new child and zero financial acumen - but they are stuck paying off this loan together and they do so religiously in fairness.
However, I've just spoken to DB and it seem they have already paid £24k so far... OK interest, I get that, but that the loan still runs for a further 18 years? The bank says the only solution is to get a loan elsewhere and pay it off but that links him still to his exp and that is a very poor idea.

Does this sound weird to anyone else? Without being rude, neither of them are financially savvy and I struggle to believe they would have signed up to this had they fully understood the consequences?

I know you have to take responsibility but the loan is already paid by £5k over - and another 18 years of payments? This is a bank not a paydayloan type place I should say.

Bank has advised him to complain to the ombudsmen.

Any opinions greatfully received!

ViolaLass

What was the interest rate?

[Deleted User]

Depending on the rate and term, it's entirely possible. Certainly nothing dodgy or weird about it.

A 28 year loan is going to generate bucket loads of interest.

Rosie1978

Uh-oh, I've just found out it's a Coventry 'Moregage'.....

Rosie1978

When sold the advisor (now no longer practising) didnt explain to them (they say) that the interest would go up to 5% when the mortgage was paid off, turning into a'loan'.

[Deleted User]

Does their paperwork back up their story?

Rosie1978

OK I've done more digging - apologies I didn't mean to dripfeed. They pay £2000 a year (£167 a month as the bank asks) and the interest per year is £1700. It has a 9.5% interest rate.

The origianl loan was 5% but as they paid off the mortgage associated with it (when house was sold following split), they weren't aware that if they didnt pay off the loan at the same time that the interest would rise a further 5%.

Neither will be able to get the credit to get another loan to pay this off - they are stuck.

Rosie1978

And I guess no - this was ten years ago, he is no longer practising and it was all done verbally. Oh god.

[Deleted User]

They should at least look at overpaying. Even small amounts will save them a lot in the long run.

molerat

Two options
Get another loan at a lower rate and higher payments.
Pay more each month.

When they signed up they probably only looked at £19,000 for only £167 a month, end of train of thought. Many fall into the trap.

Rosie1978

Thank you all. They wouldn't be able to raise the £9k each to get a loan to repay it and you are right - they fell into the age old trap. It seems impossible that this could be offered in this day and age anyway but they must be stuck. They insist the broker didn't tel them about the rise if they repaid the mortgage but he doesnt practice now, so what can be done.

Breaks my heart. Thanks for your help, all.