Advice re settlement figure

bettermoneymgmt

Hi all
I've got a loan with loans2go for £300. Taken out over the longest period as the plan had been to pay it within a few months. It has a high APR, no issue there. It was needed at the time and the plan to pay off would have worked but circumstances changed and here we are.

I have requested a settlement figure and it is £329.29. The monthly amount is £68.57 over 18 months and I've been paying it for 12 months so already £822.84 in total. So.. I'm wondering how the settlement figure can be right when it's still over the original loan amount? The agreement doesn't mention a fee/penalty.
I am new to good money management and don't really know how loans/loan APRs work, etc. so not sure if I can push back or if it is what it is?
Thanks

[Deleted User]

That won't be the correct settlement figure, based on the information you've given.

What's the APR? Any initial or final larger payments? Any missed payments or additional fees? What does the agreement give as the total amount payable?

bettermoneymgmt

Hi, no the monthly amount is the same start to finish. No missed payments, etc. Total amount payable if paid in full over 18 months is £1234.26.

[Deleted User]

And the APR?

Infrastructure

If it was 267% APR, and there is a two month interest penalty for clearing the loan early, this would make sense.

£300 @ 267% over 18 months would be a payment of £68.60 per month

After 12 months the capital outstanding would be approximately £233

Two months interest on this would be approximately £96

Total to repay now would be approximately £329

ThisnotThat

Infrastructure said:

If it was 267% APR, and there is a two month interest penalty for clearing the loan early, this would make sense.

£300 @ 267% over 18 months would be a payment of £68.60 per month

After 12 months the capital outstanding would be approximately £233

Two months interest on this would be approximately £96

Total to repay now would be approximately £329

Although they say they don't charge early repayment fees so either they're deciding to not class the interest charges as early repayment fees or they're charging it when they shouldn't.

bettermoneymgmt

Ok so I dug out the agreement. It says the APR is 1013.3%? But also says
"Interest is charged at a simple fixed interest rate of 207.6 % per annum on the amount of credit for the term and is applied to the account, in full at the commencement of the agreement."
It doesn't mention anything about penalty for withdrawing early. It just says "You have the right to repay the credit early at any time in full or partially. You can withdraw from the agreement by calling us on 0330 400 4380 or writing to us at Loans 2 Go Limited 34a Deodar Road London SW15 2NN. If you withdraw from the agreement you will have to repay the amount of loan issued within 30 days of the date you told us you want to withdraw from it. If you do not repay all amounts when they are due, the agreement will continue."
Later on it says "To repay all the credit early you must pay all amounts due to us under this agreement less any rebate of charges allowable by law"

ThisnotThat

bettermoneymgmt said:

Ok so I dug out the agreement. It says the APR is 1013.3%? But also says
"Interest is charged at a simple fixed interest rate of 207.6 % per annum on the amount of credit for the term and is applied to the account, in full at the commencement of the agreement."
It doesn't mention anything about penalty for withdrawing early. It just says "You have the right to repay the credit early at any time in full or partially. You can withdraw from the agreement by calling us on 0330 400 4380 or writing to us at Loans 2 Go Limited 34a Deodar Road London SW15 2NN. If you withdraw from the agreement you will have to repay the amount of loan issued within 30 days of the date you told us you want to withdraw from it. If you do not repay all amounts when they are due, the agreement will continue."
Later on it says "To repay all the credit early you must pay all amounts due to us under this agreement less any rebate of charges allowable by law"

You'll need to ask them about it.

They say on their website there are no early repayment fees but the calculations clearly point to them charging two months interest.  Either they have a different definition of an early repayment fee (everyone else would consider the two months interest charge an early repayment fee) or they've made a mistake.

Nearlyold

The two months interest charge is not actually a "fee" as such, it arises because of the way the Early Settlement Regulations allow the date when the early settlement is deemed to have been made to be post dated.

All is explained here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34687/12-1264-consumer-credit-directive-guidance.pdf

In particular paragraphs 14.39 and 14.40 on page 67

When a customer requests a full or partial early settlement the lender has to calculate a rebate of the interest charges that would have otherwise been charged if the loan had continued as before. In calculating this rebate the assumed date of the full or partial early settlement is 28 days after the request, or 58 days after (at the lenders discretion) if the loan has more than 12 months to run.


The customer then has 28 or 58 days in which to make the payment, if they make the payment earlier than the 28 or 58 day deadline the lender does not have to adjust the rebate of interest calculation already made, the customer is simply giving the lender some free working capital for a period.

Some lenders don't make the charge however those that do will usually include details in the Terms and Conditions by referencing the early settlement regulations or similar legal phrasing.

ThisnotThat

Nearlyold said:

The two months interest charge is not actually a "fee" as such, it arises because of the way the Early Settlement Regulations allow the date when the early settlement is deemed to have been made to be post dated.

All is explained here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34687/12-1264-consumer-credit-directive-guidance.pdf

In particular paragraphs 14.39 and 14.40 on page 67

When a customer requests a full or partial early settlement the lender has to calculate a rebate of the interest charges that would have otherwise been charged if the loan had continued as before. In calculating this rebate the assumed date of the full or partial early settlement is 28 days after the request, or 58 days after (at the lenders discretion) if the loan has more than 12 months to run.


The customer then has 28 or 58 days in which to make the payment, if they make the payment earlier than the 28 or 58 day deadline the lender does not have to adjust the rebate of interest calculation already made, the customer is simply giving the lender some free working capital for a period.

Some lenders don't make the charge however those that do will usually include details in the Terms and Conditions by referencing the early settlement regulations or similar legal phrasing.

I'm aware, but in common parlance the interest is the fee.

It appears they're using arguably sharp practice to imply that there is nothing to pay other than the outstanding capital when you settle the loan, which clearly isn't correct although almost certainly legal.

foxy-stoat

bettermoneymgmt said:

Ok so I dug out the agreement. It says the APR is 1013.3%? But also says
"Interest is charged at a simple fixed interest rate of 207.6 % per annum on the amount of credit for the term and is applied to the account, in full at the commencement of the agreement."
It doesn't mention anything about penalty for withdrawing early. It just says "You have the right to repay the credit early at any time in full or partially. You can withdraw from the agreement by calling us on 0330 400 4380 or writing to us at Loans 2 Go Limited 34a Deodar Road London SW15 2NN. If you withdraw from the agreement you will have to repay the amount of loan issued within 30 days of the date you told us you want to withdraw from it. If you do not repay all amounts when they are due, the agreement will continue."
Later on it says "To repay all the credit early you must pay all amounts due to us under this agreement less any rebate of charges allowable by law"

All the numbers seem to work out to me.
If you do not settle early you have 6 more payments of £68.57 to pay = £411.42
If you settle early you will save £82.13.
The fact that you have paid 12 months of 207% interest on £300 shouldn't have any impact as that is in the past.