AA Loans

soapywrapper

Good afternoon,

I recently took out an unsecured loan with AA loans. The loan amount was for £14,900 and the total amount repayable over 5 years is £18,765,60 including interest.

I recently made an additional lump sum payment of £2500. When I have done this for other loans in the past, the money I paid always came off the capital owed (the same with a credit card) however, in this case, they have advised me the £2500 has been deducted off the total loan amount of £18,756.60 giving me a new balance of around £15,592. 

The day ofter making the lump sum payment, I called the AA to ask them to stop the payment and refund it as I was not happy with this arrangment.Even thought the payment had not left my bank, they refused to do this and still took the money out of my account.

I have 2 questions -

1. Is it right that the additional lump sum payment did not just come off the capital owed but rather the whole loan amount including interest?

2. Where they within their rights to still take the money, even after I requested they stop the payment, which had not left my bank account. (my bank told me to contact the AA to stop it)

Thanks

[Deleted User]

The additional sum will have come of the capital (it can't work any other way).

They just display it the balance as still showing full interest for the term.

It would be unusual if they'd been able to cancel the payment once in process. Fortunately it's to your benefit that it still went through. 

Marcio45

They cant apply the payment to interest that has not yet been accrued. Its probably how they do to show the total cost of the loan, interest included.
You dont say how many months you had the loan for and how many monthly payments you have done.
From the amounts you mention it appears that the £15592 is the new cost of the loan, once you made the £2500 payment. There is a difference of just under £3200 which seems to be the savings in interest you will make by paying (partially) early.

Fighter1986

If you asked them for a settlement figure you'd find it is different, due to the overpayment you've made having reduced the capital balance.

It's just that their system seems to display your balance as inclusive of future interest. A settlement figure would not show this. At least, it shouldn't. If it does, raise a formal complaint.