Natwest early settlement fee confusion

SandraX

Dear OP

Your title to your thread. I never report anyone and won't. But do you not
feel that the title is inappropriate?

I hope you get it all sorted.
ATB

[Deleted User]

anamenottomention

Re: thread title remark. The question mark answers that question. But let's face it, most banks are thieving [insert preferred word here].

worried_jim

anamenottomention wrote: »

Re: thread title remark. The question mark answers that question. But let's face it, most banks are thieving [insert preferred word here].

Yet good enough to loan you a thick chunk of cash.

MABLE

Not sure if it still works but in the past I have paid off the loan and left about £50.00 owing. I then request a settlement figure and they only charged interest on the £50.00 outstanding. Anyway always worked with Lloyds.

Dobbibill

Welcome to the forum.

Please don't feel 'a complete idiot'. You did the right thing coming to the forum to seek a second opinion, so to speak. You sought information from a trusted source. You are in no way to blame for the wording, misunderstanding of the website - I agree with other posters, it was incorrect.

Good news to see you are in position to pay off the loan. Well done.

Changing the title of the thread may not lead to such confusion for other forum users who can also learn from this thread. Are you able to amend it at all?

I too have sent feedback to CAB, as suggested by Tarambor.

Thank you for sharing the source.

ThePants999

Hang on, guys, the CAB isn't totally wrong. The Consumer Credit Act DOES have a thing on an interest rebate for early repayment - see http://www.legislation.gov.uk/uksi/2004/1483/regulation/2/made and following pages. I think the CAB have just misinterpreted it - it's "based on" the full interest, but it isn't actually the full interest. http://www.legislation.gov.uk/uksi/2004/1483/regulation/4/made is the actual calculation but is a bit hard to follow. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/34687/12-1264-consumer-credit-directive-guidance.pdf has some worked examples in the appendix but they don't make it much easier to understand!

You know how the total interest you pay on a loan is front-loaded, right? I.e. your repayments are mostly interest near the start of the term, and mostly capital at the end? I think - and would love to be corrected if I'm wrong - that the basic idea of this regulation is to avoid consumers who repay a loan early from being significantly penalised by that. If you repay a loan half way through the term, you've paid significantly more than half the total interest - and in particular, you've paid more interest than you would have paid if you originally signed up to half the original term, and I think the rebate is designed to put you in a position as if you'd originally signed up to the term you actually had the loan for, or something like that.

ThePants999

After some further reading, I think I HAVE misunderstood.

There are basically two ways of representing the "balance" of a loan agreement. One is to say on day 1, "you borrowed £10,000, so your current balance is £10,000", and then add interest every month on what you actually currently owe. The other is to say on day 1, "you borrowed £10,000, and the interest on this loan over the term is £3,000, so you owe £13,000" and then the balance only goes down from there. I think the "rebate" the CAB are on about here only applies in the second case - if your balance includes interest that really relates to a portion of the loan that's later than the settlement date, it should get knocked off.

Banks like Natwest do it the first way, so the only interest you've paid has been interest you actually owed, so there won't be a rebate.

[Deleted User]

ThePants999 wrote: »

You know how the total interest you pay on a loan is front-loaded, right?

No loans have front loaded interest.

Interest is only higher at the start of the term as the capital is higher.

ThePants999

I'm not sure what "front loaded interest" means to you. It's an ambiguous term. But it certainly exists, depending on your interpretation.

The way I was using it was simply to describe how, if you look at the total amount of interest you pay over the term of a loan, you pay a larger proportion of it in the early part of the term than in the late part. You are obviously correct as to WHY that is, but I would still consider "front loaded" to be useful phrasing to describe that perspective. So from that point of view, ALL loans have "front loaded interest".

Alternatively, the second case I described in my previous post is referred to by some people as "front loaded interest", as all the interest that would accrue during the term is added at the start. That absolutely does happen with some credit agreements, and (as I understand it) is the reason for the "rebate" in the CCA (to basically "undo" the front loading if the loan is repaid early).