Rule for paying off loans early

AnotherJoe

Tarambor wrote: »

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.

IANAL but it seems crystal clear to me that by taking out a seperate loan you are not buying the panels on credit. You are doing two different things. Taking out a loan. Buying the panels for cash.

You would be buying on credit if as you say you bought them on a credit card.

By taking out a loan on its own standing you (I mean whoever is doing this) has disconnected the two transactions and there's no liability. Who's to say it's the panels you bought with the money from this loan rather than say your next years grocery shopping or your sky subscription?

Sounds like advice from someone whose heard about the protection and thinks it applies whatever you do when it clearly cannot otherwise you could get protection for anything you bought in a year by taking out a loan on Jan 1 and paying it back and then claiming whatever you bought in the year was the responsibility of the lender. Even our nanny state hasnt gone that far.

antrobus

Jerry_from_Nailsworth wrote: »

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.

I believe it to be bad advice and incorrect.

For the bank to be liable, s75 of the CCA must apply, and there must be a "debtor-creditor-supplier agreement" in force.
https://www.legislation.gov.uk/ukpga/1974/39/section/75

As in, you have at least part paid by a credit card, or it's a HP deal etc and so forth. There must be a link between the finance and the purchase.

If you simply take out a bank loan of £10,000, the bank has no liability for any problems you experience with whatever you spend the money on, whether it's sex, drugs, rock n'roll, or something frivolous like a solar panel system.

And I'm not convinced that there are any circumstances in which a bank would be liable for a "guarantee" of an "investment for 15 years if the company went into liquidation".

Ergates

List_Maker wrote: »

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?

No, it's to avoid/reduce early pay off "fees". The theory being: Whilst you can always make additional payments on a loan (I think that's a legal requirement on lenders) you *may* be charged fees for closing the account (i.e. paying off completely) early. These fees are based on the interest that would be due on the remaining balance at the time you pay it off. Therefore, if you reduce your balance to £5 the previous month/week/day then your early closing fee would be based on the interest due on £5 (small) not on £10000 (large).

That's the theory - I don't know if it's actually correct or not, and/or what kinds of loans it could be applied to.

Brock_and_Roll

Still lost on this....if the OP can pay all of the loan off bar £5 straight away, what's the point of the blooming loan in the first place?

It will not give the OP any protection against a future default in the PV panel supplier s obligations.

EDIT: As a banker, I strongly suspect there is someone on a sales commission involved!!!

foxy-stoat

I dont think the OP is coming back.