Bamboo Loan - early repayment shock

danny69

I took out a 24 month, £2,000 loan with this company in 2020. The interest was 69.9%, and knowing this I had planned to repay the loan early. Upfront, this company charge the fixed interest to the front of the term, and this £2,000 loan meant I owed a total of just over £3,300. 

After making my payments for 13 months I had approximately £1,500 still to pay. This obviously included all the interest upfront, assuming I would be making repayments over 24 months. In the past month I had paid a chunk of this £1,500 off, and had under £1,000 left to repay over the next 11 months. I asked for a settlement figure, and to my surprise I was told that it would be just over £20 less than if I continue to make the 11 payments. 

I paid my loan off in full to get it out of the way. My question is, does this seem fair? I know more interest is paid at the start of any loan, but to have to pay £1,270 out of the £1,300 of interest having paid the loan off a little over halfway through the term seems extreme. 

Has anyone else had a similar experience? Is there any way I can appeal or ask for an explanation etc of this? Should I be due a further rebate going forward or not? 

[Deleted User]

You can ask for the figures. The settlement will be your remaining capital, plus two months interest. There's no further rebate.

Your figures quoted don't reflect the outstanding capital as you've included future interest. 

MallyGirl

Front loading of interest is not allowed. 
Why do you think you have £1500 to pay after 13 months? Is that your logic or what they told you?

The picture is for a mortgage but the same applies to a loan. Your payment is fixed but at the beginning it is mostly interest as you owe a lot. Over time as you pay off more capital then the interest is lower (leaving more from the fixed payment to pay off capital). By then end there is very little interest and you are mostly paying capital. 

danny69

MallyGirl said:

Front loading of interest is not allowed. 
Why do you think you have £1500 to pay after 13 months? Is that your logic or what they told you?

The picture is for a mortgage but the same applies to a loan. Your payment is fixed but at the beginning it is mostly interest as you owe a lot. Over time as you pay off more capital then the interest is lower (leaving more from the fixed payment to pay off capital). By then end there is very little interest and you are mostly paying capital. 

On the app I have, the balance remaining was around £1,500. This is how I came to this figure. I am hoping that a complaint will get a response. if not, I will be taking it further. The interest was something like 50.2% with an APR of 69.9%. I obviously expected that much more interest would be paid earlier on in the loan, but not almost £1,300 in 13 months and just £25 in the entire final 11 months. 

DrEskimo

danny69 said:

MallyGirl said:

Front loading of interest is not allowed. 
Why do you think you have £1500 to pay after 13 months? Is that your logic or what they told you?

The picture is for a mortgage but the same applies to a loan. Your payment is fixed but at the beginning it is mostly interest as you owe a lot. Over time as you pay off more capital then the interest is lower (leaving more from the fixed payment to pay off capital). By then end there is very little interest and you are mostly paying capital. 

On the app I have, the balance remaining was around £1,500. This is how I came to this figure. I am hoping that a complaint will get a response. if not, I will be taking it further. The interest was something like 50.2% with an APR of 69.9%. I obviously expected that much more interest would be paid earlier on in the loan, but not almost £1,300 in 13 months and just £25 in the entire final 11 months. 

There probably is more interest being saved than £25, but they are likely charging you an early settlement fee (of up to 2months additional interest, as zx81 pointed out in their post), so the saving is being negated by this early settlement fee.

It may be that you can partially settle the account to a, say a single payment left, not get charged any early repayment fee, then allow the remaining balance to settle the next month with your standard direct debit payment.

You will need to check your T&Cs carefully.