Default Balances on Loans

periwinkleperkins

I'm struggling to understand exactly how a default balance is calculated and why two banks do things differently.

I have two loans, one with First Direct and the other with Sainsbury's' Bank. I defaulted on both loans last year as I was out of work due to ill health, but the two banks are treating the loans very differently and one is expecting to receive everything owed under the original agreement whereas the other is happy to receive everything owed at the date of default.

First Direct statements start with a loan balance of the total amount borrowed, then deduct any payments and add that months' interest - this means the "balance" is always less than the amount I originally borrowed and roughly equal to the settlement figure.

However, Sainsbury's Bank statements start with a loan balance of the amount borrowed plus interest for the 5 year term, then deduct any payments made but no interest is added - this means the "balance" for the first couple of years is significantly higher than the amount borrowed and much higher than the settlement figure.

So I wanted to understand what the basis is for the different calculations and methods by the banks, whether there is precedent for how they should treat the actual balance at the point of default and how Sainsbury's can say they have frozen interest when their balance includes the interest to the end of the original term.

Thanks in advance for any help and advice - I want to make sure that my debt management plan uses the correct figures to apportion payments (as at the moment Sainsbury's is skewing things massively in their own favour).

[Deleted User]

The balance is calculated exactly the same in each case - balance plus interest accrued to date.

The two methods of showing it are just a cosmetic difference. Settlement figures will show you the true current balance of each.

periwinkleperkins

If there were no defaults, then I would agree that over the term of the loan there is no real difference... however at the date of default, FD is showing a realistic balance of what was owed that day whereas SB is showing an inflated figure including the interest to the end of the term.

What's more, both have agreed to suspend all interest for my DMP but it seems a hollow gesture from SB given the default figure includes all of the interest already.

llyng

PLEASE SOMEONE HELP URGENTLY
Unfortunately the house was repossessed it was three people were on the mortgage my son myself and my husband.
The house was sold leaving £90,000 less than market price I had got ill and lost my job but was also taken to bankruptsey. My now ex-husband and my son were left to pay the short fall I am on benefit and my son refused to take help form me and my ex would not meet to make any arrangement to sort it out. Both my ex and my son were paying the balance off my son using a company to deal with payments. My ex emigrated last year and had made and offer of £3000 to the finance company over five years ago and it had been accepted but didn't tell my son who was being hounded for more money. They both had the same account numbers to pay monies so the balance should be clear but the company that had been working for my son said they didn't know that the account had been paid in full and they backed out of the contract with my son.
He has been trying to sort this out and wont discus it with me but feel that he has been duped into paying this debt that had been cleared by my ex. He is worried about going bankrupt and is unable to buy anything lives alone in bedsit as any relationship the partner will have the debt too. all though from repossession no advice given. Please someone he need help asap.

[Deleted User]

periwinkleperkins wrote: »

If there were no defaults, then I would agree that over the term of the loan there is no real difference... however at the date of default, FD is showing a realistic balance of what was owed that day whereas SB is showing an inflated figure including the interest to the end of the term.

What's more, both have agreed to suspend all interest for my DMP but it seems a hollow gesture from SB given the default figure includes all of the interest already.

The figure with all interest is cosmetic only. Interest cannot be charged into the future.

There is no difference.

[Deleted User]

llyng wrote: »

PLEASE SOMEONE HELP URGENTLY
Unfortunately the house was repossessed it was three people were on the mortgage my son myself and my husband.
The house was sold leaving £90,000 less than market price I had got ill and lost my job but was also taken to bankruptsey. My now ex-husband and my son were left to pay the short fall I am on benefit and my son refused to take help form me and my ex would not meet to make any arrangement to sort it out. Both my ex and my son were paying the balance off my son using a company to deal with payments. My ex emigrated last year and had made and offer of £3000 to the finance company over five years ago and it had been accepted but didn't tell my son who was being hounded for more money. They both had the same account numbers to pay monies so the balance should be clear but the company that had been working for my son said they didn't know that the account had been paid in full and they backed out of the contract with my son.
He has been trying to sort this out and wont discus it with me but feel that he has been duped into paying this debt that had been cleared by my ex. He is worried about going bankrupt and is unable to buy anything lives alone in bedsit as any relationship the partner will have the debt too. all though from repossession no advice given. Please someone he need help asap.

You've posted on someone else's thread.

However, your ex's 3k offer won't have settled the 90k balance. They will pursue him for the balance.

His partner will not have the debt.