Early Repayment

exhaustedbrit

I'm wondering whether the following is reasonable, as it doesn't feel right to me but it might just be my fault for not reading the small-print.

I borrowed £3,000 from lender X just over 5 months ago over 36 months at an interest rate of 41.06% pa fixed. At the time I understood that early repayments are allowed. However my early settlement figure quoted was much higher than £3,000.

Through the money advice service live chat, the representative suggested that this could be due to 'front-loaded' interest, however as I understand it, with a full early settlement I should only pay the remaining principal balance plus a maximum of 58 days interest as the contract was more than a year.

Am I barking up the wrong tree, should I suck up and pay the early settlement figure?

BoGoF

What was the total amount repayable, including interest? What was the settlement figure quoted?

exhaustedbrit

The total amount repayable including interest £5,262.99.

The quoted early settlement figure was £3,740.00.

BoGoF

Defo seems to high - what does your loan agreement say about early settlement. It isn't a business loan?

exhaustedbrit

It's not a business loan no, it reads:

Where you settle your agreement early, the full amount of interest
which would have been payable up to the end of the loan is payable,
less any statutory rebate to which you may be entitled.

BoGoF

If you google 'early repayment loan calculators' there are various out there. They do give slightly differing results but £2700/£2800 would be about right.

The loan is regulated by CCA 1974?

mattvolatile

Try the Amortization Calculator here for an illustration:

https://www.amortization-calc.com/loan-calculator/

I plugged your figures in -- it suggests you're repaying about £146 per month. Assuming your loan started in March, your current balance is £2715, so I'm not surprised that your settlement figure is close to £3k. It doesn't look like there's a "front loading" issue here; it's just that obviously your monthly interest accrued is very large on the opening balance.

As you'll see from the table, because the interest rate is so high, at the moment twice as much of your monthly repayment is going to interest than principal.

mattvolatile

(Just to add, because I missed it: the £1,000 over your principal does seem a little high -- ask for a full breakdown of the calculation, so you can see where they're stinging you? Looks like there are some fees in there somewhere....)

iolanthe07

41.06% pa fixed

Does 'fixed' mean the same as Flat Rate? If so, your APR is somewhere around 80%!

Nearlyold

Lenders often use the term "fixed" when quoting the Flat rate.

OP look through your agreement for the APR, as iolanthe07 has said I bet its somewhere around 80%

mattvolatile

Nearlyold wrote: »

Lenders often use the term "fixed" when quoting the Flat rate.

OP look through your agreement for the APR, as iolanthe07 has said I bet its somewhere around 80%

It's not. He quoted the total loan amount above, £5,262.99, which matches the APR he provided of about 41%.