Loans settlement query

paddysreturn

Batesy1976 said:

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.

Hi Batesy, 

Understood. However, without the interest my home made calculator and the online amortisation tool both have the outstanding balance at 5200 (mine says 5206 but very close). Therefore, which ever way I slice it - using the calculators or using the front loaded for display only, the settlement figure comes out approx 150 higher than I was expecting. 

Batesy1976

paddysreturn said:

Batesy1976 said:

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.

Hi Batesy, 

Understood. However, without the interest my home made calculator and the online amortisation tool both have the outstanding balance at 5200 (mine says 5206 but very close). Therefore, which ever way I slice it - using the calculators or using the front loaded for display only, the settlement figure comes out approx 150 higher than I was expecting. 

Then your calculators are wrong.

paddysreturn

Batesy1976 said:

paddysreturn said:

Batesy1976 said:

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.

Hi Batesy, 

Understood. However, without the interest my home made calculator and the online amortisation tool both have the outstanding balance at 5200 (mine says 5206 but very close). Therefore, which ever way I slice it - using the calculators or using the front loaded for display only, the settlement figure comes out approx 150 higher than I was expecting. 

Then your calculators are wrong.

I think I’ll leave it there rather than carry on. Thanks to those who ha e contributed to the thread.

Jami74

paddysreturn said:

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.

Could it be that the settlement offer is valid for 30 days, therefore they've included the interest for those 30 days, as well as 60 days interest for early repayment?

On my calculator (11k, 16% 3 years £385.73) after 21 payments you'd have a balance of £5,226.23 left. Interest for that month would be £69.69. Plus another 2 months on top of that takes it to £5,435.30.

Obviously the number of days in each month and when you pay will alter the amounts and even a little alteration over 21 months will add up to quite a big difference.

It does seem unlikely that a high street banks computer systems would make an error, although it's possible that the people you speak to on the phone about it don't understand the algorithm that the computer uses. Personally I'd pay as much off as possible as soon as possible because for every day that you have the loan each pound is accruing interest.

Nearlyold

Jami74 said:

paddysreturn said:

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.

Could it be that the settlement offer is valid for 30 days, therefore they've included the interest for those 30 days, as well as 60 days interest for early repayment?

On my calculator (11k, 16% 3 years £385.73) after 21 payments you'd have a balance of £5,226.23 left. Interest for that month would be £69.69. Plus another 2 months on top of that takes it to £5,435.30.

Obviously the number of days in each month and when you pay will alter the amounts and even a little alteration over 21 months will add up to quite a big difference.

It does seem unlikely that a high street banks computer systems would make an error, although it's possible that the people you speak to on the phone about it don't understand the algorithm that the computer uses. Personally I'd pay as much off as possible as soon as possible because for every day that you have the loan each pound is accruing interest.

Actually its the permitted post dating of the early settlement date for "30" or "60" days that gives rise to early repayment charge,  the charge arises because the regulations allow the lender to  post date the assumed date of settlement by up to 58 days from the date of the request for a settlement figure and it's not reduced if you clear the loan earlier than the "valid up to" date in the settlement quote. Lenders are also allowed to apply the same calculation to any overpayments (aka partial settlements).