Warning about AA Loan Early Repayment

DrEskimo

AndyHanners said:

DrEskimo said:

To add to the great explanations above, you can calculate how much you are saving by simply subtracting the total amount of the loan if you run the full term (i.e. all monthly payments for 5-years) from all payments you have made to date plus the settlement figure.

The amount you save isn't returned to you as a rebate of any kind. It is realised by paying an overall lower amount than you would have otherwise paid had you just paid monthly for the entire 5-years.

And the result - saving absolutely nothing as the settlement figure is exactly the amount of monthly repayments x months remaining

Is this clearly set out as an 'early settlement figure'? It's not uncommon for them to display the outstanding amount, which would just be the total cost of the loan if it ran the full term.

Is there anything in the T&Cs about early settlement fees?
If so, it may be possible to partially settle and then leave a small amount to be repaid by your direct debit, which avoids the early settlement fee (again will depend on the T&Cs).

AndyHanners

DrEskimo said:

Is this clearly set out as an 'early settlement figure'? It's not uncommon for them to display the outstanding amount, which would just be the total cost of the loan if it ran the full term.

Is there anything in the T&Cs about early settlement fees?
If so, it may be possible to partially settle and then leave a small amount to be repaid by your direct debit, which avoids the early settlement fee (again will depend on the T&Cs).

Yes it is the settlement figure which is why am I am warning people that if you want to settle this loan early they are still going to charge you the full amount as if it had run the full term - if this doesn't right to you then that is exactly my point  

AmberDepp

AndyHanners said:

DrEskimo said:

Is this clearly set out as an 'early settlement figure'? It's not uncommon for them to display the outstanding amount, which would just be the total cost of the loan if it ran the full term.

Is there anything in the T&Cs about early settlement fees?
If so, it may be possible to partially settle and then leave a small amount to be repaid by your direct debit, which avoids the early settlement fee (again will depend on the T&Cs).

Yes it is the settlement figure which is why am I am warning people that if you want to settle this loan early they are still going to charge you the full amount as if it had run the full term - if this doesn't right to you then that is exactly my point  

No, they're not.

You were quoted the wrong figure by an inexperienced call handler.

Call them back and ask them for an early settlement figure.

AndyHanners

 

No, they're not.

You were quoted the wrong figure by an inexperienced call handler.

Call them back and ask them for an early settlement figure.

I have had the settlement figure in writing twice and also made a formal complaint about the figure which they rejected.
I suppose a complaint to Financial Ombudsman is my next step. Meanwhile this site still recommends the AA Loan.

DrEskimo

AndyHanners said:

 

No, they're not.

You were quoted the wrong figure by an inexperienced call handler.

Call them back and ask them for an early settlement figure.

I have had the settlement figure in writing twice and also made a formal complaint about the figure which they rejected.
I suppose a complaint to Financial Ombudsman is my next step. Meanwhile this site still recommends the AA Loan.

If you provide the exact figures here we can provide more helpful advice.

AA are a regulated company. Front loading is not permitted and they are only allowed to charge up to 2-months of additional interest in early settlement fees.

Without the exact figures we can't help you understand this.

It would be prudent to check everything before going all guns blazing attacking both AA, and MSE because of their endorsement.

AndyHanners

Settlement quote obtained on 13/05/2022

Amount required to settle your agreement before rebate £4093.18
Minus rebate on early settlement £0.00
Total required to settle your agreement £4093.18

(this was with 13 months left to repay at £314.86 per month)

After my complaint I received this letter on 07/12/2022:

Our records show that you called our Customer Service team on 13th May 2022 to request a full early settlement quote. The note from the call confirms that in order to settle your loan early and in full, a payment for the full remaining account balance would be required, as no interest rebate would be due.

I would like to clarify that in line with your loan agreement, interest is added at the beginning of your loan and your monthly repayment amounts contain a higher proportion of interest than credit at the start of the loan and this reduces with a higher amount of credit being repaid as the term progresses. Therefore more interest is repaid at the beginning of the loan.

Therefore, should you wish to settle your loan early and in full, a payment of the remaining balance is required. At today's date, the balance of your loan is £3,778.32.

For the reasons stated above I am unable to uphold your complaint.



I'm happy to send anybody scans of the originals if you think I am lying about this.

AndyHanners

If you provide the exact figures here we can provide more helpful advice.

AA are a regulated company. Front loading is not permitted and they are only allowed to charge up to 2-months of additional interest in early settlement fees.

Without the exact figures we can't help you understand this.

It would be prudent to check everything before going all guns blazing attacking both AA, and MSE because of their endorsement.

See above

Dave_5150

I have had numerous personal loans over the years. Without exception they were all settled early, and I have never paid any more than two months interest when settling early. This includes at least one loan from the AA.

This is what the AA loan website currently states about early repayment: 

Early repayment of the loan

You can repay all or part of the credit borrowed at any time, as outlined in the Loan Agreement. It's called an Early Settlement and this may incur a charge of up to 58 days' interest.

Dave_5150

You can find a link to information about rebates in the "Can I pay my loan off early" section on this page of their website https://www.theaa.com/loans - the document is named "early settlement February 2020", and it states:

What's a rebate?

Before you take out a loan with us we'll calculate what interest charges you need to pay based on the applicable fixed rate, the amount borrowed, and the original term of your agreement. The interest is added onto the amount you're borrowing, and the total is then divided by number of months over which you have chosen to repay your loan. This is your monthly repayment amount.

If you make an Early Settlement you'll be entitled to get some of this interest back, and this is known as a rebate.

- Partial Early Settlement – We'll deduct the rebate amount from your remaining balance. This will be taken into consideration when calculating your new monthly repayment amount or the new final payment date. The amount of your rebate will depend on which option you take.

- Full Early Settlement – We'll deduct the rebate from the amount you need to pay to clear off your loan balance.

When calculating your rebate we use a formula as prescribed by the Consumer Credit (Early Settlement) Regulations 2004. It takes into consideration information such as how much you are repaying each month, how long you still have to pay on your loan, and the settlement date.

The settlement date determines how much the rebate will be, and if you're making a full Early Settlement how much you owe us. The settlement date we use is:

- 28 days from the date you notify us.
- Plus an additional deferment of 30 days

This means that when we calculate your rebate we'll use a date 58 days from the date you notify us

 

AndyHanners

Dave_5150 said:

I have had numerous personal loans over the years. Without exception they were all settled early, and I have never paid any more than two months interest when settling early. This includes at least one loan from the AA.

This is what the AA loan website currently states about early repayment: 

Early repayment of the loan

You can repay all or part of the credit borrowed at any time, as outlined in the Loan Agreement. It's called an Early Settlement and this may incur a charge of up to 58 days' interest.

Yes I read all of that on their website, yet as I keep saying settling one year early they don't give you any of the interest back. Please read the text of the correspondence I received from them which I posted earlier.