Please help - Loan anguish

R.G

Hi forum,

I was hoping some of you who have a better understanding of loans may be able to chime in.

I’ve had two Sainsbury’s loans running consecutively for a few years now. Last week I decided to consolidate both and given that I’ve always been really happy with Sainsbury’s, I would normally have approached them to facilitate this for me, but there rates are a little higher these days, presumably due to the climate.

I decided to apply for a Post Office loan who are underwritten by BOI as they are offering a decent headline rate. My application took 10 mins online, I got a straight accept for the 3.4%apr and the funds were in my account the following day.

I took £17,100 over 7 years. I did this as it allowed me pay a very small amount of money monthly with the option of overpaying whenever i wish, without penalty, which is great as I will take advantage of this and most likely request an early settlement figure within a couple of years, depending on what happens in 2021 with the markets/earnings etc.

Since getting the loan I have received no paperwork as my loan agreement was agreed online, so other than a sketchy looking email, I have no reference on paper, as I had with m6 other loans. I have had to request a copy of the loan agreement to be sent.

I was wondering If anyone else has had experience, or has, a loan with PO? 

I ask because between the reviews I have subsequently read, twinned with the awful customer services team who answer the phones - all of which sound like really young, inexperienced, juniors, I’m a little concerned.

I’ve called them a few times since getting the funds in my account to ask various questions, again, because I have no loan agreement to refer to for quick reference.

All I want to know is how the loan interest is applied. Is it equally, per month as you go along, or is it ‘front-loaded’ which I’ve been hearing so much about?

I asked the customer services to give me a hypothetical idea of what I’d owe in 6 months time. So that’s 6 x £228.64 and he told me I’d owe more than the £17,100 still. I told him that I think he was referring the balance, rather than an early settlement figure, which would be different, but he was adamant I’d owe more? When I asked him, and another colleague of his to give me a rough breakdown of how that could be, they both said it’s difficult to explain and that there is an algorithm. Basically, they didn’t know.

If I kept the loan for the entire duration, I would be charged £2,205.76 in interest of 7 years, so £19,205.76.

For my own sanity, can I assume that I will never, ever, be told that I owe them more than the balance at the start of the loan, regardless of whenever I tell them I want to settle the loan?

I spoke to another well known lender today who also confirmed their lending is based on ‘front-loaded’ interest. 

Is this practice normal, and are PO loans a decent enough company to keep my loan with? I’m considering withdrawing, paying them back, and going with Tesco or the like, who are a percent higher, but I have this idea that they are safer?

Please can someone answer this in layman’s terms for me with ref to interest etc?

Sorry fort the long post, I’m really worried.

Thank you

[Deleted User]

There's no front loaded interest. As with all loans, interest is calculated daily.

R.G

Deleted_User said:

There's no front loaded interest. As with all loans, interest is calculated daily.

Thanks.

Are you saying that PO loans are the same as any other lender, i.e Sainsbury’s, Tesco’s etc?

An advisor at PO loans said they were front-loaded himself, or was he choosing poor terminology?

sourcrates

I’d be more worried about the decision to consolidate your debt than anything else.
A lender is a lender, they all operate under the terms of the consumer credit act, it’s pretty normal for everything to be done online these days, usually the terms are emailed to you.

R.G

sourcrates said:

I’d be more worried about the decision to consolidate your debt than anything else.
A lender is a lender, they all operate under the terms of the consumer credit act, it’s pretty normal for everything to be done online these days, usually the terms are emailed to you.

Why the concern?

[Deleted User]

R.G said:

sourcrates said:

I’d be more worried about the decision to consolidate your debt than anything else.
A lender is a lender, they all operate under the terms of the consumer credit act, it’s pretty normal for everything to be done online these days, usually the terms are emailed to you.

Why the concern?

Because it's never the best idea in the world to borrow money to repay borrowed money, I suppose the question should be have you repaid your two sainsburys loans and was the interest rate from the PO lower than that rate?

R.G

venison said:

R.G said:

sourcrates said:

I’d be more worried about the decision to consolidate your debt than anything else.
A lender is a lender, they all operate under the terms of the consumer credit act, it’s pretty normal for everything to be done online these days, usually the terms are emailed to you.

Why the concern?

Because it's never the best idea in the world to borrow money to repay borrowed money, I suppose the question should be have you repaid your two sainsburys loans and was the interest rate from the PO lower than that rate?

I haven’t paid the two Sainsbury’s loans off yet, no. The PO funds are sitting in my account and I’m thinking considering what to do.

 The two Sainsbury’s loans are both at 3%. The total ‘settlement’, not balance, for both, combined, is £17,000, hence the new loan for £17,000.

At 3.4% with the new loan and the option to pay off early or overpay without charge, I don’t see the huge issue?!

This new loan isn’t because I’m having to take it out to manage, it’s just to make things a little easier and if I over pay, I won’t be incurring much more interest.

Clive_Woody

If you were to settle a 7 year loan very early then you would have paid off very little of the balance but normally they can charge two month's interest as an early repayment fee. This may be why your settlement figure is actually higher than the amount borrowed.

R.G

Clive_Woody said:

If you were to settle a 7 year loan very early then you would have paid off very little of the balance but normally they can charge two month's interest as an early repayment fee. This may be why your settlement figure is actually higher than the amount borrowed.

I’m less than a week in to 14 day cooling off period, whereby I can simply withdraw and payback the loan without any interest. 

Beyond that, yes I’m aware of the two months interest.

This is all getting very confusing. Essentially, all I was checking was that there would be an interest rebate and that they can’t charge me thousands extra if I settled within a few months.

That was aside from my original question as to how legit PO loans are.

Thanks all.

HummingBird76

Hmmm, I think that would really bother me too. My last loan I got from Halifax, and I only got an email about that, but then I can keep track of it online. I wouldn't like not being able to do that. I think I'd be tempted to cancel the agreement, given you also say you've read a lot bad reviews...

[Deleted User]

R.G said:

Deleted_User said:

There's no front loaded interest. As with all loans, interest is calculated daily.

Are you saying that PO loans are the same as any other lender, i.e Sainsbury’s, Tesco’s etc?

An advisor at PO loans said they were front-loaded himself, or was he choosing poor terminology?

Front loaded is just a term used by people who don't understand how loans work and confuse it with more interest being charged on a higher balance than a lower one.  Front loading's not been legal for a decade.

The PO aren't anyone's first choice for customer service, but there's nothing inherently wrong or different with the loan products themselves.