Loans settlement query

paddysreturn

Hi, 

I took out a loan for 11k with HSBC in June 2019 (first payment July 2019) @16.9% over 3 years (36 Installments @ £386)

So far I have made 21 of the 36 payments and today enquired about a settlement figure, which is quoted as 5552. If I pay the remaining 15 payments as normal the total would be 5784 so I was expecting the settlement figure to be around 5200. 

I’ve run an excel calculation and also checked with an online loan amortisation calculator and they both come in around the 5200 mark, even taking into account the additional 60 days interest being charged. 

Any idea as to what I may be overlooking? With over a year left the interest rebate should be much higher but I can’t imagine a high street bank having an error in their figures.

Thanks

foxy-stoat

Your figures must be out somewhere as after making the 21st monthly payment of £386 your capital for month 22 would be £5,398.  Their settlement figure sounds about right.

[Deleted User]

I make it about £5,500 using an online actuarial settlement calculator, with the two months early settlement included. So their figure seems closer.

The exact number will depend on when the payments were made.

paddysreturn

foxy-stoat said:

Your figures must be out somewhere as after making the 21st monthly payment of £386 your capital for month 22 would be £5,398.  Their settlement figure sounds about right.

Hi Foxy, 

Thanks for replying. 

Can you explain how you came to the figure of 5398 please? That seems to assume 14 outstanding payments but I have 15.

Also, my loan account confirms that the current figure (incl interest) is 5784.

Thanks

foxy-stoat

£11,000.00 + 16.9% / 12 = £11,154.92 - £386 = £10,768.92 (capital after month 1 payment)
£10,768.92 + 16.9% / 12 = £10,920.58 - £386 = £10,534.58 (capital after month 2 payment)

and so on.

It actually leaves a balance of £261.75 after month 36 payment, so some of the numbers you have given must be wrong.

After month 21 payment you would of paid £2,504.81 in interest against your total monthly payments of £8,106.  £11,000 - £8106 + £2504 = £5398.

How did you work out how much you owed after month 21 payment cleared?

ZX is correct about the payment dates, as the banks work out interest on a daily basis, my rough calculations are worked out monthly so 30.42 days in the month, which is not 100% accurate, but close enough for me.

paddysreturn

Deleted_User said:

I make it about £5,500 using an online actuarial settlement calculator, with the two months early settlement included. So their figure seems closer.

The exact number will depend on when the payments were made.

Hi Zx81, 

Thanks for responding. I too used an online amortisation calculator and it came out at 5200. I’m not sure where the difference would lie. 

Completely crudely speaking, with a 17% rate and over a year to pay, the interest must be significantly more than £280

foxy-stoat

paddysreturn said:

Deleted_User said:

I make it about £5,500 using an online actuarial settlement calculator, with the two months early settlement included. So their figure seems closer.

The exact number will depend on when the payments were made.

Hi Zx81, 

Thanks for responding. I too used an online amortisation calculator and it came out at 5200. I’m not sure where the difference would lie. 

Completely crudely speaking, with a 17% rate and over a year to pay, the interest must be significantly more than £280

You are correct, the interest for the remaining term is £652.94, but you havent been charged that yet, only 60 days worth of interest when adding to the outstanding capital.

paddysreturn

foxy-stoat said:

£11,000.00 + 16.9% / 12 = £11,154.92 - £386 = £10,768.92 (capital after month 1 payment)
£10,768.92 + 16.9% / 12 = £10,920.58 - £386 = £10,534.58 (capital after month 2 payment)

and so on.

It actually leaves a balance of £261.75 after month 36 payment, so some of the numbers you have given must be wrong.

After month 21 payment you would of paid £2,504.81 in interest against your total monthly payments of £8,106.  £11,000 - £8106 + £2504 = £5398.

How did you work out how much you owed after month 21 payment cleared?

ZX is correct about the payment dates, as the banks work out interest on a daily basis, my rough calculations are worked out monthly so 30.42 days in the month, which is not 100% accurate, but close enough for me.

Hi, 

Thanks again for looking at this me for me.

I think it’s not 1/12 because the interest is compound, maybe that’s where the difference lies. I’m confident that the basic figures I’ve given are correct as my account shows the outstanding amount, the month started and the settlement figure + my monthly payment.

The current balance is 5784 and the settlement figure 5552, with over a year outstanding.

It seems there isn’t something obvious I’m overlooking so I need to speak to HSBC directly. 

foxy-stoat

They dont refund interest already paid unless the add interest in advance.  If your current balance is £5784 then their settlement figure of £5552 seems good to me.

paddysreturn

foxy-stoat said:

They dont refund interest already paid unless the add interest in advance.  If your current balance is £5784 then their settlement figure of £5552 seems good to me.

Yes, the account already added the interest from day 1. When I took out the loan for 11k, my account immediately showed a total amount owing of approx 14k, with the balance reducing by the full payment each month, 

Batesy1976

paddysreturn said:

foxy-stoat said:

They dont refund interest already paid unless the add interest in advance.  If your current balance is £5784 then their settlement figure of £5552 seems good to me.

Yes, the account already added the interest from day 1. When I took out the loan for 11k, my account immediately showed a total amount owing of approx 14k, with the balance reducing by the full payment each month, 

That's for display purposes only.  Interest isn't actually front-loaded.