HSBC over payments

moliv3r

Hello,

I need some advice on what is happening with my loan over payments. To make this simple lets say I've got a loan of £1000 over 10 months(which includes combined amount of the capital and interest) with £100 monthly payments.
If after 3 monthly payments I make a £500 over payment leaving 2 further monthly repayments until the loan is cleared. Doesn't that mean I've effectively paid 10 months interest for a 5 month loan?
I'm trying to talk this through with HSBC but it's like banging your head against the wall, you call and they send you to the branch, you go to the branch they say they'll send you information in post which never happens.

[Deleted User]

moliv3r wrote: »

Doesn't that mean I've effectively paid 10 months interest for a 5 month loan?

No. You'd pay in the region of seven months interest - the 5 months you have the loan, plus 2 months interest for early settlement.

However, the value of interest in each month would be markedly different, due to the changes in the capital amount.

The upshot is that you will pay less interest.

moliv3r

Thanks, that’s pretty much my thinking. After processing an over payment of say £500 I would expect to see a reduction in the remaining loan amount of £500 plus some interest but that doesn’t appear to be happening

[Deleted User]

It depends how they display the balance - with interest included or not.

Either way, you'll pay less interest.

Mahsroh

I understand your point, I've had this with HSBC before... as they don't show the interest reduction. It's annoying!


So for arguments sake, you have a loan of £2400 over 24months (including interest). After month 4 you still owe £2000 but then make a 1 off overpayment of £100, you would expect the balance to then be reduced to (say) £1895 allowing for reduction in interest, but it still shows on your account as £1900.


But as zx81 has said, either way, you will pay less interest. I can only assume they adjust your final payment to account for the saved interest, but as I settled my loan (of sorts) early I don't know what they would have done when I'd got down to, say, the last couple of hundred quid.

moliv3r

Thanks Mahsroh, sounds like the over payments will reduce the amount I repay but their online system just doesn't show the interest reduction. I will give it a couple more months over payments and then call them up to clear the remaining amount.

Mahsroh

moliv3r wrote: »

That is what they keep telling me but in the example above I would have still paid them £1000 even though I've cleared the loan in half the time.

In theory they should credit you the difference. It may be that this will happen at the end of your loan.


I don't know where you are in terms of paying your loan off but assuming you still have repayments remaining, perhaps tackle it a slightly different way. Call them today and ask what the figure would be, today, to settle the loan. If that's slightly different (less) to the amount showing on your balance then you know they've taken the interest on the overpayments into consideration.


When you call, don't mention the overpayments, or previous conversations. Simply tell them that you are considering paying the loan off, and ask what the balance owed is.