Early Repayment Charge. Help!

aims2020

Hi everyone, this is my first contribution to a MSE forum as I'm in need of some advice I can't quite find online... 
Long story short a year and a half ago I was in a terrible situation financially and took out a loan from Hitachi (£7,500) over 5 years at a rate of 36.9% Apr. Ive paid every £251 a month without fail for the last 20 months. Im now in a position to repay the loan in full early. I looked into this 4/5 weeks ago and my settlement figure was £6,100 yet today I've checked and it is now £6,300. I just can't seem to get my head round why it is so high and why it's increasing. My loan agreement doesn't state a specific charge, not in the early settlement section or tariff of charges section.
Thanks in advance for any help! 

cymruchris

From my calculations - for a loan of that value over that term at that apr - if you paid it off at the normal rate to the end you would pay around £7600 interest on your £7500 loan - total repayable around £15000. 

I know you’ve made 20 months worth of payments but to simplify explanation using the table below - After one year (12 payments) - your capital borrowed will have reduced from
£7500 to £6773 - £727 - although you’ll have made payments totalling £3013. 

This is because of how they calculate the interest. The early years of a loan you pay more interest and less capital - and as you progress to completing the loan you pay more capital and less interest. 

So although you’ve paid around £5k - a lot of that has been interest payments - your figure keeps going up as interest is continually added - then you make a payment and it drops down. Then it starts going up again every day until you make the next payment. 

Does that help explain where you’re at ?

(ignore the fact it says mortgage - I just used a simple online calculator to show the yearly reduction in capital owed at your loans apr)

aims2020

Hi Chris and thank you so much. As you can probably tell I'm not very clued up with this sort of thing, had no idea it's the interest I've been mainly paying off so far rather than capital, so yes that does explain where I'm at very well. Thanks again!