Rule for paying off loans early

Jerry_from_Nailsworth

I am borrowing £10,000 to pay for some solar panels I am having installed.
I was advised to take out a loan from a well known bank in order to protect myself if the solar panel company went out of business.
The advise was a follows.
1. Take out the loan for £10,000.00 over 15 years.
2. After one month I should contact the bank and in accordance with their rules ask to overpay leaving just £5 in the account.
3. One month later I should phone again and close the account.
This I was told would then mean that the bank would guarantee my investment for 15 years if the company went into liquidation.
I would be grateful if anyone could confirm if this is good advice and is correct.
I am also interested why I have to overpay and leave £5 for another month. Why can't I simply just cancel the loan.
Any comments gratefully received.

Edi81

Who on earth told you that?
Is this some for of linked Finance to the solar panel company?

Gaz83

Are you referring to Section 75 protection?

TrickyDicky101

For £10k it must be a bloody big solar PV system (or you're getting ripped off) - have you got DNO permissions for it? Are you a business customer?

foxy-stoat

I think you have been ill advised there. What protection are you trying to buy? If they go out of business after the panels have been fitted you will still have a manufacturer's warranty surely, just nothing for the fitting.

Brock_and_Roll

This sounds like a load of nonsense, indeed dangerous advice!!

List_Maker

Sounds like the Bank or Bank worker in question still gets their quota/fee if you leave the loan open over their internal period. Be it 30/60+Days

A benefit for them rather than you perhaps?

Merlin139

First thing you should do is look at the cost of the system. If its only a 4kWP system then you are paying around £4.5K to £5K too much!

All the installer wants is the money from you.

Who is the installer?

McKneff

Walk away....

PRAISETHESUN

You'd have to check the terms of your agreement for what the restrictions are for paying off loans early - if you are even allowed to do it at all. What you have been told doesn't sit well with me. You'd get extra protections if you paid by credit card but you won't get anything extra from taking out a bank loan, so I think you may have been told something dodgy here. I'd probably consider walking away from this if I were you...

System

OK I'm assuming from your original post that you have enough money to actually pay this outright without any borrowing.

What the rigmarole they've told you to do is so that you benefit from Section 75 protection. Section 75 refers to section 75 of the Consumer Credit Act that makes a lender jointly liable with a retailer for anything you buy that is over £100 when any of it is put on credit, even £1. In the case of something going wrong and the retailer not playing ball or having gone bust then you can go through the lender to get it sorted just as if they had been the people who sold you it.

However you don't need to take out a £10,000 loan to do this nor do you need to keep a loan open. All you need to do is if you have a credit card is to pay a small deposit on that credit card to the solar company, even as little as £1. That then puts the credit card company on the hook for the full lot and would provide the protection they were talking about if the solar company went bust during the guarantee period.