Loans2Go question

eLdn123

Hello all,

I've written a previous post regarding handling debt and other issues, which I am trying to resolve through, but unfortunately I've ran into some difficulties with a company called Loans2Go. I understand that I shouldn't have used this company, as their APR is outrageous, but please understand that gambling is a really bad addiction, and when I took out the loan I was at the peak of the addiction.

Let's look at some numbers, and maybe you can help me understand if this sounds right, because to me it really does not. I will use approximate numbers, as I am concerned that the company may be reading the forum, and due to the situation, I wouldn't want to be recognised.

Loan amount taken - 1000 £ over 18 months ( this is what they offer and there is no option of changing the loan period )

Total amount payable - 4100 £

Total monthly payment - 4100/12 = 227.77 £ per month

Payments made so far - 4 payments = 911.08 £

Current Arrears 5 months - 1138.85 £

Early settlment figure - 2100 £ -> if I would be able to pay this figure, the total I would have paid as far would be 2100 + 911.08 = 3011.08 £

I don't really understand the settlment figure to be honest, and now to highlight why I am confused about this.

4100 / 3 = 1366.66 £ this would be the amount payable every 6 months during the life of the loan

9 months of loan = 1366.66 £ + 227.77 * 3 = 2049.97 £ for 9 months of the loan

3011.08 - 2049.97 = 961.11 £ -> this would mean that after 8 months I would have paid only 40£ out of the principle ? I am really confused here, is it legal to front load interest like that ?

[Deleted User]

Interest is never front loaded.

You pay little off the capital in the early months as you're paying so much interest on the higher balance.  As the capital reduces, the ratio changes.

The high APR, long term, arrears and early settlement fee all make for an expensive loan.

eLdn123

Deleted_User said:

Interest is never front loaded.

You pay little off the capital in the early months as you're paying so much interest on the higher balance.  As the capital reduces, the ratio changes.

The high APR, long term, arrears and early settlement fee all make for an expensive loan.

This is a quote from the company :

"Interest is charged at a simple fixed interest rate of XX per annum on the amount of credit for the term and is applied to the account, in full at the commencement of the agreement."

"The interest is frontloaded, which means that all the interest which will become payable over the term of a loan is added at the beginning of the loan term."

Based on this, how can the interest not be front loaded ? Also, would really like to understand, even with the high APR, how could this look good from a calculation perspective ?

[Deleted User]

They've mis used the term. Front loading was outlawed a decade ago.

They mean that the total amount payable over the full term includes the interest. In reality, it's charged daily.

Break down your APR to a monthly rate and you'll see roughly how much interest you were charged in the first month.

Your settlement figure will be your current balance plus two months interest.

eLdn123

Apologies, forgot to add but the option to edit not sure why it doesn't work :

If we take the example values I gave above

4100 total payable - 4100 - 1000 = 3100/18 = 172.22 £ interest per month

172.22 * 9 = 1549.98 £ interest payable in 9 months

1549.98 + 1000 = 2549.98 £ interest for 9 months and capital

2549.98 - 911.08 = 1639.9 £ difference -> this is lower than the offered settlement figure

Also would like to question regarding High Cost Short Term Credit legislation. The legislation states that a HCSTC is considered a loan which is due to be repaid or substantially repaid within 12 months. Would we not have 2 situations in this case :

1. The company is bypassing the definition by having a mandatory timeline of 18 months for the loan ( as I've said it can not be changed ) , case in which the definition is clearly gamed ? Also, if the actual principle is being paid within the final 6 months of the agreement, would it not be caught by the definition ( "substantially repaid" )

2. If a request is made for early repayment, which falls within 12 months from the loan start date, would it again not be caught by the definition ? As with the early repayment, it would again potentially fall under the wording of the defintion.

eLdn123

Deleted_User said:

They've mis used the term. Front loading was outlawed a decade ago.

They mean that the total amount payable over the full term includes the interest. In reality, it's charged daily.

Break down your APR to a monthly rate and you'll see roughly how much interest you were charged in the first month.

Your settlement figure will be your current balance plus two months interest.

Ok, I understand your point of view, but even calculating like that, the amount resulting is around 100-200£ under the settlment figure received, so I am still confused.

SnowTiger

APR of 1,000% is a monthly interest rate of about 22%.

Month 1: loan: £1,000; interest added is £220; you make a payment of £227.77.
Month 2: loan: £992; interest added is £218; you make a payment of £227.77.
Month 3: loan: £982; interest added is £216; you make a payment of £227.77.
Month 4: loan: £970; interest added is £213; you make a payment of £227.77.
Reamining: £955.

I've rounded the figures.  At such a high APR even a small rounding can lead to quite a large discrepancy.  However, as you can see after making payments for four months you have only paid back about £45.

Loan remaining £955 + arrears of £1,138.85 = £2.093.85.

A settlement figure of £2,100 seems about right.  Loans2Go has probably done its calculations with more accuracy than I have.

As with most loans, in the early days most of what you pay goes towards interest.

eLdn123

SnowTiger said:

APR of 1,000% is a monthly interest rate of about 22%.

Month 1: loan: £1,000; interest added is £220; you make a payment of £227.77.
Month 2: loan: £992; interest added is £218; you make a payment of £227.77.
Month 3: loan: £982; interest added is £216; you make a payment of £227.77.
Month 4: loan: £970; interest added is £213; you make a payment of £227.77.
Reamining: £955.

I've rounded the figures.  At such a high APR even a small rounding can lead to quite a large discrepancy.  However, as you can see after making payments for four months you have only paid back about £45.

Loan remaining £955 + arrears of £1,138.85 = £2.093.85.

A settlement figure of £2,100 seems about right.  Loans2Go has probably done its calculations with more accuracy than I have.

As with most loans, in the early days most of what you pay goes towards interest.

Interest per annum quoted at 207.6%, which would translate to a monthly interest value of 17.3, so out of 1000£, would be 173£ per month. Based on this, would it not be :

Month 1 loan 1000 interest added 173, payment of 227.77

Month 2 945.23 interest added, 160.6901, payment 227.77

And so on ?

MalMonroe

Hi, I hope it's not rude to ask but do you now have your gambling addiction under control? It's just that if not, your financial situation won't get any better. Have you thought about contacting one of the debt help agencies such as StepChange, 0800 138 1111? It's free, confidential and non-judgemental. They will be able to offer advice about how to deal with Loans2Go, which sounds like a despicable company. I contacted SC a few years ago when I was at my wit's end. My financial problems seemed insurmountable and they really did help me. You don't have to meet anyone face to face at any time. Sometimes the Financial Ombudsman is also able to intervene in cases where people have been given loans inappropriately. I feel that this may have happened in your case, since gambling addiction is now a recognised illness and the NHS suggests that gamblers contact the National Debtline on 0808 808 4000.  Either someone there or at StepChange will be able to advise you, I'm sure. If not, they will be able to tell you who can. I just think it's so wrong that loans companies like this are allowed to make so much profit out of people who have an illness, or who are desperate. Good luck - I do hope you feel able to contact one of the debt help agencies. 

eLdn123

MalMonroe said:

Hi, I hope it's not rude to ask but do you now have your gambling addiction under control? It's just that if not, your financial situation won't get any better. Have you thought about contacting one of the debt help agencies such as StepChange, 0800 138 1111? It's free, confidential and non-judgemental. They will be able to offer advice about how to deal with Loans2Go, which sounds like a despicable company. I contacted SC a few years ago when I was at my wit's end. My financial problems seemed insurmountable and they really did help me. You don't have to meet anyone face to face at any time. Sometimes the Financial Ombudsman is also able to intervene in cases where people have been given loans inappropriately. I feel that this may have happened in your case, since gambling addiction is now a recognised illness and the NHS suggests that gamblers contact the National Debtline on 0808 808 4000.  Either someone there or at StepChange will be able to advise you, I'm sure. If not, they will be able to tell you who can. I just think it's so wrong that loans companies like this are allowed to make so much profit out of people who have an illness, or who are desperate. Good luck - I do hope you feel able to contact one of the debt help agencies. 

Fortunately my gambling is now under control, and have used gamcare to self exclude myself from all gambling websites. Interesting, I was not aware tht the gambling is recognised as an illness, thank you for that information. I am in the process of getting on top of all my debt, and would ideally want to get rid of the Loans2Go loan and pay if off, but the amount they are requesting is just too much and really makes no sense to pay under a year, 200% in interest , as payments of almost 1000 already made, and a settlement figure of around 3000 would translate as 200% above the amount of the principle. It seems to be too mych and I don't know how companies are allowed to do business in such a manner.

SnowTiger

eLdn123 said:

SnowTiger said:

APR of 1,000% is a monthly interest rate of about 22%.

Month 1: loan: £1,000; interest added is £220; you make a payment of £227.77.
Month 2: loan: £992; interest added is £218; you make a payment of £227.77.
Month 3: loan: £982; interest added is £216; you make a payment of £227.77.
Month 4: loan: £970; interest added is £213; you make a payment of £227.77.
Reamining: £955.

I've rounded the figures.  At such a high APR even a small rounding can lead to quite a large discrepancy.  However, as you can see after making payments for four months you have only paid back about £45.

Loan remaining £955 + arrears of £1,138.85 = £2.093.85.

A settlement figure of £2,100 seems about right.  Loans2Go has probably done its calculations with more accuracy than I have.

As with most loans, in the early days most of what you pay goes towards interest.

Interest per annum quoted at 207.6%, which would translate to a monthly interest value of 17.3, so out of 1000£, would be 173£ per month. Based on this, would it not be :

Month 1 loan 1000 interest added 173, payment of 227.77

Month 2 945.23 interest added, 160.6901, payment 227.77

And so on ?

Is your interest rate 207.6% ARP?

From their website: 'Representative example if you borrow £550 over 18 months at a flat rate of 207.6% per annum (fixed) with a representative 1013.3% APR you will make 18 monthly payments of £125.71, repaying £2,262.78 in total.'

Usually interest is added to a loan every day, however most punters only make a payment once a month; therefore they end paying interest on interest.