Early settlement fee from M&S Bank

in Loans
8 replies 1.1K views
rayudurayudu Forumite
19 Posts
Tenth Anniversary 10 Posts Combo Breaker
I took out a personal loan of £12000 for 24months with interest rate of 2.8% on Jan5th 2022.

The loan is for home improvement, but my circumstances were changed and I want to pay back the loan.

The monthly payment is £514.52 and I have paid my first monthly installment on Feb5th, when I called customer care to get the final settlement fee, they quoted £11572. 

When I checked what the settlement figure is comprised of - they were unable to tell me because the 'system' generates it and they don't know.

The term and conditions about early payment is "If you repay part of the loan early, your monthly repayment will stay the same but you may repay the loan more quickly. If you repay the loan in full, the formula in the regulations we use to work out the reduced amount of interest we can charge, works as if we charged interest at the rate that applies to the loan from the date we gave you the loan to the date which is 28 days after you give us notice, plus an additional month if your loan is repayable over a period of more than 12 months. For example, if the loan is for 36 months and you give us notice on 1 September that you want to repay the loan on 14 September, the amount required to repay the loan will include interest up to 29 October."

For the full term of 24 months, the total amount will be £12348.52 ( £514.52 x 24), which comes around £14.52 interest per month, my understanding is if I am paying now I will be paying extra 2 months interest ( total interest of £29).

Loan amount - £12000
paid - £514.52
Interest charged for 4 months( Around 2 months of loan period + 2 months interest for early repayment) - 4x14.52 = £58

Outstanding balance - £12000 + £58 - £514.52 = £11543 rather than £11572

Any advice on calculations? Thanks


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