High interest Loan - NRAM

Three_Spires_Lillian

I had a loan on top of mortgage in 2006 (120% mortgage). It was 18thousand but worked out 27,682pounds with interest. I paid off mortgage a few years ago when I moved to a bigger house and just kept the loan on with the intention of paying the loan off a year down the line.

I contacted NRAM recently about paying off the remainder of the balance and was told that the balance is 21,192 pounds after 12 years. I have been paying 276pounds a month for 12 years and hardly paid anything off. I asked about paying it off early and surely I wouldn't have to pay all of the balance as a lot of that is interest.

I worked out that I am only paying 47pounds off a month and 226pounds is interest.

I just don't understand why the balance is so large. I have another 13 years of paying this and I had just borrowed 18 thousand on top of my mortgage for repairs etc.

Can anyone make any suggestions? When I asked NRAM about paying it early they said I needed to pay 21 thousand back. It just makes no sense to me... I'm really confused.

Apologies the pound sign isn't working on my laptop..

I borrowed from NRAM (used to be called Northern Rock). It was 6% when I had the mortgage and then went up to 12.79% when I paid my mortgage off.

BorisThomson

Interest on your loan is £2,710 per year. You're only paying £3,300 towards it. You can understand why it is taking so long for the balance to reduce.

Your options are to make overpayments, or to try and get a lower rate loan and pay the NRAM one off.

Three_Spires_Lillian

I don't understand why it is 21k to pay off early though... makes no sense. Normally you only pay interest up to the day you pay off loan.

BorisThomson

Three_Spires_Lillian wrote: »

I don't understand why it is 21k to pay off early though... makes no sense. Normally you only pay interest up to the day you pay off loan.

It has been accruing interest up to now. When did you get the £18K figure, in 2006 or more recently?

Partridge89

Not sure how it could have been accruing interest as it’s not front-loaded so as
Long as OP has been covering the interest the balance should have been going down.
OP, have you been in arrears or had any payment holidays?

ViolaLass

Have fees ever been applied at any point? Ever missed any payments?

Vikipollard

Three_Spires_Lillian wrote: »

I had a loan on top of mortgage in 2006 (120% mortgage). It was 18thousand but worked out 27,682pounds with interest. I paid off mortgage a few years ago when I moved to a bigger house and just kept the loan on with the intention of paying the loan off a year down the line.



I borrowed from NRAM (used to be called Northern Rock). It was 6% when I had the mortgage and then went up to 12.79% when I paid my mortgage off.

No expert, but might the bit in redbe part of the problem? The interest rate has more than doubled?

System

Three_Spires_Lillian wrote: »

I don't understand why it is 21k to pay off early though... makes no sense. Normally you only pay interest up to the day you pay off loan.

They also often add a few months interest if you repay it early, there will be something about early redemption penalties in the terms and conditions. If that is the case at an APR of 12.79% that'll be a quite significant sum.

Ask the loan company for a statement. It'll show you how you owe that amount.