Paying interest due to pay date on weekends

chris525uk

Hello,

I’m new here and this is my first post so, sorry in advance if its been covered before.

Anyway... just wondering if i can get some advise.

I took out a personal loan last year for £7,000 over 2 years with interest it works out to be about £7,560. I get paid on the 28th of every month so i set my payment date for the 28th of every month. I have now paid the first year off and i have had my annual statement come through the post today and it looks like i have paid about £358 in interest due to missed payments. Is this my fault that weekend make a payment late? Why dont they take it out before if its a weekend? I had no idea it was doing this for a year now. Can i request to be refunded the charges back as it was totally out of my control?

bradders1983

I think you have misunderstood how a loan works tbh. Most of the interest is going to be in the first year. Make 12 more payments on time and the loan will be zero. The weekday your payment is due on is irrelevant.

[Deleted User]

Direct debit or standing order?

What exactly does it say in relation to the £358 interest?

It sounds as if it's just normal interest.

chris525uk

Its a direct debit. Why am i paying interest? It states in the agreement if i pay £315.32 over 2 years the total amount payable will be £7,567.68. So why am i getting charged more? And the APR is fixed

Nearlyold

Not really sure why you are asking why you are paying interest - the answer is simple because you've borrowed £7,000 and the banks make their money by charging interest.
The interest is not spread evenly through the term of the loan it's charged daily as a % of the current balance that day  and added monthly. Naturally you'd expect to pay more interest at the start of the loan than at the end because the balance is higher - so the amount of interest you've paid is precisely what you would expect to have paid this far into the loan. In the 2nd year you'll pay £202 in interest. As you can see from your statement the interest charged is gradually reducing month by month. If you Google "Guardian Loan Calculator" and put your loan details in you'll see how it works.

[Deleted User]

chris525uk said:

Its a direct debit. Why am i paying interest? It states in the agreement if i pay £315.32 over 2 years the total amount payable will be £7,567.68. So why am i getting charged more? And the APR is fixed

You're being charged interest because you agree to be charged interest.

£560 of interest to be precise. 

bradders1983

chris525uk said:

Its a direct debit. Why am i paying interest? It states in the agreement if i pay £315.32 over 2 years the total amount payable will be £7,567.68. So why am i getting charged more? And the APR is fixed

Why are you paying interest? On a loan? Because a loan has interest on it, calculated daily. After you have paid payment 24 the loan will be cleared.

Why do you think you are going to be charged more than the £568 or so for interest?

chris525uk

Oh okay so am i reading into this wrong?
This is how i see it. I take out a loan for 7k. But with the APR at 7.6% this would make it a total of £7,567.68 paying £315.32.  So how i expect to see my annual statement is: every month £315.32 and thats it... why am i seeing odd interest debit amounts? This would mean its pushing me over the total payable amount of £7,567.68... or is it £7,567.68 + interest. Am i being thick? 

[Deleted User]

Perhaps not thick as such, but just not understanding how interest works.

Each month, they add the interest charged to your balance.  Your monthly payments stay the same and by the end of the term, add up to the capital borrowed and the interest charged.

bradders1983

You start at £7k and the interest is added monthly. Thats it.

Interest is higher in months 1-12 as the balance is higher than months 13-24. 

Nearlyold

The £567.68 you are already expecting to have to pay IS THE INTEREST but it's only added to the loan in bits as you go along, by the time you get to the end of the loan you will have paid in total £7567.68 ie £7,000 you borrowed plus £567.68 in interest