Northern Rock Loan - Where to Start?

Knittygritty804

Hi, I'm very new here, this is only my second post as I brave lifting my head *out* of the sand, so to speak, and I know that there is a *huge* amount of info re Northern Rock mortgages/loans, which is why I'm posting really as I'm already feeling a little overwhelmed. I would appreciate any help or advice so much.

We took out our 100% mortgage in 2006, along with a loan of £2,000 (which we didn't actually want but were encouraged to take by our mortgage advisor at the time). We are currently paying the loan portion off through a DMP, and haven't really thought beyond that if I'm honest.

But it's always bugged me that by the time we began paying through the DMP, what started as a £2,000 loan had accrued £6,200 interest, so that the balance was then £8,200. Up until this point we had made all payments in full and on time, so surely the balance should have decreased, or at least stayed at £2,000 if we were only paying interest (our mortgage is interest only). So I'm struggling to understand how it accrued so much interest. 

I have written to them to enquire, and their response was that because we are making reduced payments through the DMP, the balance will reduce at a slower rate, but that wasn't what I was asking really, I want to know how the balance crept up so much in the first place. Just to be clear, no interest has been applied during the time we have been making reduced payments, the interest has accrued during the time we were making payments in full and on time. I have only kept statements from the last few years and have requested copies dating to the time before we went on the DMP.

I do accept full responsibility at sticking my head in the sand about it all, the whole thing has affected my mental health and ability to deal with life in general. I have searched the forum and read round it a bit but haven't come across any incidences where the original loan amount has increased. 

I really appreciate your time for reading and any advice on what I might be able to do to understand the situation a bit more clearly. Many thanks 

TrickyDicky101

Do you still live in the original property on which you took out the mortgage (and do you still have the mortgage outstanding)?

Knittygritty804

Yes, we do still have the property and the mortgage outstanding. Thank you. 

SeanG79

My guess is that the loan was secured on the property and so not regulated by the consumer credit act. So when you defaulted on the loan, the full amount repayable (all the remaining payments from default to end of term of the loan) fell due.

Second Charge Loans only became regulated in March 2016. 

Knittygritty804

Thank you so much for taking the time to respond. If that is the case, do you think there would be room to negotiate with them, we have so far paid off just over £3,000 of the loan, and are there guides on this anywhere? Sorry to ask so much, I'm just really trying to get my head around where we stand. 

[Deleted User]

You can offer a full and final but if you are paying back and they have the loan secured on the house (you'd have to check that) then why would they accept anything less? They can get their full debt either from you or by forcing the sale of the house.

Knittygritty804

The loan is unsecured. Thank you for taking the time to respond. I really do appreciate it. 

sourcrates

Knittygritty804 said:

The loan is unsecured. Thank you for taking the time to respond. I really do appreciate it. 

If the loan is unsecured, then its very likely to be regulated by the consumer credit act.
Your first step should be a CCA request to the lender, if you don`t know what that is, then Debt Camel explains here -

Debts - why, how & when to ask for the CCA agreement · Debt Camel

Failure to produce a legible copy of your credit agreement renders the account unenforceable in court, this can create leverage for you to agree a more beneficial settlement agreement than you would normally have been able to achieve.

Knittygritty804

Thank you, that's really helpful. I really appreciate your time and help ☺️

SeanG79

I suspect the loan is secured along with the mortgage, I doubt they will be blatantly breaching CCA regulations around interest charges for early settlement/default. 

In addition if it wasn't secured, I would have expected the loan to be sold on to a Debt Collection Agent whilst in a DMP based on the amount outstanding, with reduced payments for such a long period.

If it is secured, it is unlikely you will have much leverage to negotiate down the amount but it is definitely worth a try. 

Brie

I would also be questioning why the loan was forced on them in the first place.  Surely this is little different to PPI and other unscrupulous sales tactics.  I wouldn't be surprised to hear that the advisor was getting a bonus based on the bits s/he could tag on to a mortgage.