Early overpayment on loan

sarahw1988

Dear all


I could really do with some advice. I am trying to make an overpayment of £1000 on a loan with Natwest and they are wanting to charge 58 days interest, however this website informs me that banks are not allowed to charge a fee for any loans taken out after 1st February 2011 where the overpayments total less than £8000 in a year. I have spoken to Natwest about this who deny all knowledge of this and say they can charge 58 days interest as per the terms and conditions of my loan....

Pixie5740

Can you link to the part of the MSE website which says this please?

sarahw1988

It won't let me copy the link but the information can be found under 'Cheap personal loans' and 'Can I repay my loan early?'

Pixie5740

https://www.moneysavingexpert.com/loans/cheap-personal-loans

Where it says,

If your loan was taken out on or after 1 February 2011, you can make partial overpayments on your loan. If your extra repayments total under £8,000 in a year, banks are not allowed to charge you a fee for making an overpayment. But if your overpayments total over £8,000 in a year then the bank is allowed to charge you so long as it has incurred a charge itself.

NatWest are not charging you a fee for making an overpayment. NatWest are charging you 58 days interest (not a fee) for repaying the loan early.

foxy-stoat

It states on the agreement that you have the right to make early/extra repayments - they have the right to charge compensation in such cases.

Nearlyold

The charge is allowed - The article on this site is incorrect, whoever wrote it has misinterpreted the European Consumer Credit Directive which came into force in 2011.

All is explained here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34687/12-1264-consumer-credit-directive-guidance.pdf

In particular paragraphs 14.39 and 14.40 on page 67

Page 61 & 63 are in reference to 95A which allows for an additional charge/Fee to be made should the lender wish to do so subject to the conditions therein (which is what the article on the MSE site is based on) however - this has no bearing on the 28/58 day interest charge which arises from the rebate calculation under the still existing early settlement regulations. In a nutshell nothing in 95A is intended to derogate the early settlement calculation rules used in 94


When a customer requests a full or partial early settlement the lender has to calculate a rebate of interest charges that would have otherwise been charged if the loan had continued as before. In calculating this rebate the assumed date of the full or partial early settlement is 28 days after the request or 58 days after (at the lenders discretion) if the loan has more than 12 months to run.


The customer then has 28 or 58 days in which to make the payment, if they make the payment earlier than the 28 or 58 day deadline the lender does not have to adjust the rebate of interest calculation already made, the customer is simply giving the lender some free working capital for a period.


NB The lender is always free to offer more generous terms than specified in the early settlement regulations - as some do of course