Warning about AA Loan Early Repayment

Dave_5150

AndyHanners said:

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.

Then you should refer it to whoever the reply to your complaint letter says you should contact if you are not happy with their response, as they appear to have not followed their procedures. It is likely to be the Financial Ombudsman Service.

Dobbibill

Try using a loan calculator like this  http://www.whatsthecost.com/loan.aspx

The closer to the end of the loan, the lower the interest element of your payment compared to at the beginning of the loan.

Have a play with the figures to suit your own circumstances. 

AndyHanners

Try using a loan calculator like this  http://www.whatsthecost.com/loan.aspx

The closer to the end of the loan, the lower the interest element of your payment compared to at the beginning of the loan.

Have a play with the figures to suit your own circumstances. 

Thanks that's a useful site
If they charge 58 days interest as a penalty, assuming they use the first two months interest to calculate that - then that would essentially wipe out the 13 remaining months interest  that wold be normally deducted from the settlement amount. So it must be correct then - when there are 13 months remaining, you need to pay off the full amount outstanding to settle the loan.

[Deleted User]

They don't use the first two months interest. 

They calculate two months interest on the balance at time of settlement.

No matter when you clear the loan, you need to pay the full amount outstanding at the time plus two months interest.

DrEskimo

It also would be very coincidental that it worked out to the remaining balance to the pound.

Check your T&C for the agreement, as the information you have relayed to us doesn't seem correct. I agree with raising this to the financial ombudsman.

missile

AndyHanners said:

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.

You appear to have misread the above.

• "Total required to settle your agreement £4093.18"
• "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"
  

Saving £314,86 if you settled early.

DrEskimo

missile said:

AndyHanners said:

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.

You appear to have misread the above.

• "Total required to settle your agreement £4093.18"
• "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"
  

Saving £314,86 if you settled early.

That's just because there was month between the two letters, and the OP had made a further payment of £314.86.

They are not saving anything according to the complaints handler, and that shouldn't be the case.

I don't know what the amount borrowed or what the APR was, but if it was £15,000 borrowed at 9.9%APR over 60months, and the OP was looking to settle after 48months, they would be saving something like £135 in interest before any fees (which would be about £60 in this example).

AndyHanners

missile said:

You appear to have misread the above.

• "Total required to settle your agreement £4093.18"
• "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"
  

Saving £314,86 if you settled early.

No, they took a month to respond - I'd already paid another installment by then

AndyHanners

[Deleted User] said:

They don't use the first two months interest. 

They calculate two months interest on the balance at time of settlement.

No matter when you clear the loan, you need to pay the full amount outstanding at the time plus two months interest.

In which case if I settled early I should not have to pay the exact same amount as if I'd let the loan go full term.
What do you suggest, is it worth raising a complaint with the financial ombudsman?

AndyHanners

DrEskimo said:

That's just because there was month between the two letters, and the OP had made a further payment of £314.86.

They are not saving anything according to the complaints handler, and that shouldn't be the case.

I don't know what the amount borrowed or what the APR was, but if it was £15,000 borrowed at 9.9%APR over 60months, and the OP was looking to settle after 48months, they would be saving something like £135 in interest before any fees (which would be about £60 in this example).

Yes it was exactly that. What do you reckon, is it worth the hassle of raising a case for £75?