AA Loans is driving me mad

Nico_Bellic

Hello folks, thanks for reading it.

Long history short, I originally got 20k from AA last January on 84 months term. I’ve paid already 11x 320 + made a lump payment of 6k a few months ago. My outstanding balance (as they’ve informed me) is £14.1k

I’m applying for a mortgage so I would like to reduce my monthly payments in order to improve my affordability towards the mortgage.

So I called AA in order to make another lump payment of £4k.. that’s when the problem starts:
** First they take 2-5 working days to provide a simple quote;
** The quote is: After paying £4k my monthly repayment would reduce to (77x) £197. Which in my opinion is completely wrong! As 77x£197=£15.169
So I make £4k payment and my debt goes up 1k? I don’t get it?

In my maths it would have to be reduced to at least £130 after the lump payment as 14-4=10 / 77 = £129.87 (without any rebate) it should be even less.

Now I ask you experts, what I’m doing wrong?
I have spoken to them a few times and seems like they are sure about that. Also it would take around 54 days for my account to be refreshed which means I will still pay £320 for another month at least!!

I’m so frustrated that I can’t do much and my mortgage and my life are on hold because of this.

Any suggestions? Thank you very much.

Regards

Gaz83

What's the interest rate?

Pixie5740

Nico_Bellic wrote: »

Hello folks, thanks for reading it.

Long history short, I originally got 20k from AA last January on 84 months term. I’ve paid already 11x 320 + made a lump payment of 6k a few months ago. My outstanding balance (as they’ve informed me) is £14.1k

I’m applying for a mortgage so I would like to reduce my monthly payments in order to improve my affordability towards the mortgage.

So I called AA in order to make another lump payment of £4k.. that’s when the problem starts:
** First they take 2-5 working days to provide a simple quote;
** The quote is: After paying £4k my monthly repayment would reduce to (77x) £197. Which in my opinion is completely wrong! As 77x£197=£15.169
So I make £4k payment and my debt goes up 1k? I don’t get it?

In my maths it would have to be reduced to at least £130 after the lump payment as 14-4=10 / 77 = £129.87 (without any rebate) it should be even less.

Now I ask you experts, what I’m doing wrong?
I have spoken to them a few times and seems like they are sure about that. Also it would take around 54 days for my account to be refreshed which means I will still pay £320 for another month at least!!

I’m so frustrated that I can’t do much and my mortgage and my life are on hold because of this.

Any suggestions? Thank you very much.

Regards

I estimate the interest rate to be 8.8% and based on 11 payments being made and a lump sum of £6k then £14.1k is probably about right depending on when exactly the overpayment was made. Can you please confirm the interest rate OP?

OP, has someone advised you that making these overpayments will help with your mortgage affordability? Since your aim with the overpayments appears to be reduce the monthly payment rather than reduce the amount of interest you will pay then you're probably better off putting the overpayments towards your mortgage deposit.

System

Nico_Bellic wrote: »

Long history short, I originally got 20k from AA last January on 84 months term. I’ve paid already 11x 320 + made a lump payment of 6k a few months ago. My outstanding balance (as they’ve informed me) is £14.1k

I’m applying for a mortgage so I would like to reduce my monthly payments in order to improve my affordability towards the mortgage.

Doesn't work exactly like you think. It is about the debt:income ratio as well. The amount you owe also counts, not just the monthly repayments. What you owe in credit cards, loans etc will reduce the amount a mortgage lender will offer.

Nico_Bellic

Hello Gaz,

7.9% per annum

Thanks

tacpot12

Were there any fees added to the loan? £20000 over 84 months at 7.9% APR should have required a monthly payment of about £310, not £320.

I'd agree that balance owing of £14.1K is about right after the repayment of £6000. Another £4000 should reduce the balance owing to about £9000. £9000 is £14.1K minus the repayment and minus the interest saved (about £1000). So the monthly repayments over 77 months should be about £116.

However, the AA T&Cs say that they will reduce your loan term when you make a repayment, unless you tell them otherwise. Did you request a statement following the repayment of £6000 to check how this repayment had affected the loan? The problem might be caused by the fact that they reduced the loan term after the first repayment (to about 56 months?) and they have assumed that you will repay the new balance off over the new loan term. £9000 divided by 56 is about £160 per month.

Gaz83

Something doesn't add up with your figures.

If you've paid £6,000, and have paid £320 11 times, your outstanding balance should be much less than £14.1k.

I make it anything between £11,600 and £11,800 depending on when you made the £6k overpayment.

tacpot12

Gaz83 wrote: »

Something doesn't add up with your figures.

If you've paid £6,000, and have paid £320 11 times, your outstanding balance should be much less than £14.1k.

I make it anything between £11,600 and £11,800 depending on when you made the £6k overpayment.

I was working on the basis that the AA will quote the amount owing being the capital owed plus the remaining interest owed. The OP started off owing about £26000 (20K principal and about £6000 of interest). Paying off £6000 leaves the amount owing as £26K minus the early partial repayment of £6K minus the repayments made normally £320x11 minus the interest saved by the early partial repayment of £3K, giving a figure of about £14K.

Gaz83

tacpot12 wrote: »

I was working on the basis that the AA will quote the amount owing being the capital owed plus the remaining interest owed. The OP started off owing about £26000 (20K principal and about £6000 of interest). Paying off £6000 leaves the amount owing as £26K minus the early partial repayment of £6K minus the repayments made normally £320x11 minus the interest saved by the early partial repayment of £3K, giving a figure of about £14K.

Nope.

Starting balance of £20,000. Monthly interest added at 7.7%/12 per month (I know it's done daily, but this saves time).

Assuming the first payment was in arrears:

Starting Balance: £20,000
First month's interest: 0.642% of £20,000 (£128.33)
Balance: £20,128.33
Payment of £320 - balance £19808.33

Second month's interest: 0.642% of £19808.33 (£127.10)
Balance: £19,935.44
Payment of £320 - balance of £19615.44

Third month's interest: 0.642% of £19615.44 (£125.86)
Balance: £19741.30
Payment of £320 - balance of £19421.30

And so on, until the eleventh month, when the outstanding balance would have been £17617.07 after the 11th payment.

If the overpayment was made then, then the outstanding capital balance would have been £11617.07.

tacpot12

I've just checked my figures and Gaz83 is more correct than I am. Apologies.

Nico_Bellic

Hi guys, first of all thanks for your time replying to it. I appreciate that.

Sorry, I've made a mistake it's 308 not 320;
To be more accurate and precise I've just checked those details on their statement which they have sen't:

Loan Amount: 20k
Interrest: £5873.68
Duration: 84
Interrest: 7.9%

1 lump payment of £6k
Rebate deducted: £2650.76
11 months already paid

The outstanding balance today is:
£14.142.. at this point I would like to pay £4k

In my maths I would own them £10.142 (73 months remaining)
=£138 per month (73x)

they say it's wrong, they want 73 x £195 (which for me means £14.235)

Where's the catch?

Thanks