Natwest Loan

CXG1979

Hi 
Should I investigate this with Natwest and/or financial ombudsman?

I took out a loan in Oct 2019 for £35,000 over 10 years.  My monthly repayment is £566, and this has been paid on time every month, with the exception of a payment break for 6 months during covid, extending the payment period by same timeframe.  In effect, have paid off approx. £16.5k.  I called them to find out a settlement figure, and was given £33,462.00.  I'm thinking this cannot be right surely?

I cannot locate my paperwork so have requested a copy, as need to remember what the APR etc is, but is was a good deal in terms of APR from memory.

What is people's views on this? Does this look right?

Penguin_

Well given there are 120 months for the term of the loan & £566 * 120 months gives you a total amount to repay of £67920 I would hedge my bets & say that its about right.   

superbigal

CXG1979 said:

Hi 
, but is was a good deal in terms of APR from memory.

What is people's views on this? Does this look right?

If you believe what I think is about 16% APR to be a good deal.

DrEskimo

Sounds right, given the APR is about 16%, the 10-yr term and the 6-month payment break.

https://www.financecalcs.co.uk/calculators/settlement

pmartin86

You also need to remember that a 6-month payment break is not equal to a 6-month interest break, that will have probably cost you dearly.

CXG1979

Thanks for the replies so far.  Maybe you guys can help me with this part; as far as I knew, when you took out a loan, it was for X amount for Y APR = Total to repay over set period.  That to me is a finite figure. You then pay back monthly against said total.

What I don't understand is my statement; sadly I cannot get a picture up but effectively last 3 months read like this:

28/06 - Paid In - £566.20
30/06 - Paid Out - £413.06
28/07 - Paid In - £566.20
29/07 - Paid Out - £397.67
30/08 - Paid In - £566.20
30/08 - Adjustment paid in (by bank) - £36.17
31/08 - Paid Out - £450.24

This goes like this all the way back to the start of the loan, with me paying in £566, then these monies coming back out.  So my question is, is this correct, as it seems that I'm only paying back about £150 a month like this??

DrEskimo

CXG1979 said:

Thanks for the replies so far.  Maybe you guys can help me with this part; as far as I knew, when you took out a loan, it was for X amount for Y APR = Total to repay over set period.  That to me is a finite figure. You then pay back monthly against said total.

What I don't understand is my statement; sadly I cannot get a picture up but effectively last 3 months read like this:

28/06 - Paid In - £566.20
30/06 - Paid Out - £413.06
28/07 - Paid In - £566.20
29/07 - Paid Out - £397.67
30/08 - Paid In - £566.20
30/08 - Adjustment paid in (by bank) - £36.17
31/08 - Paid Out - £450.24

This goes like this all the way back to the start of the loan, with me paying in £566, then these monies coming back out.  So my question is, is this correct, as it seems that I'm only paying back about £150 a month like this??

Yes, this is typical at the start of the loan, since interest is calculated on the balance daily, and the balance is at its highest at the start.

As you slowly reduce the balance over the term, the amount of interest is reduced, so the amount 'Paid out' decreases. You will find that towards the last year or so, a large majority of the £566 will be going on capital, not interest.

superbigal

To add to the above.  It is worse because what you see as a good APR at 16%  is to most people an awful APR.  Particularly as it is not a short term loan.

Jami74

CXG1979 said:

Thanks for the replies so far.  Maybe you guys can help me with this part; as far as I knew, when you took out a loan, it was for X amount for Y APR = Total to repay over set period.  That to me is a finite figure. You then pay back monthly against said total.

No. Interest is worked out daily and added once a month. The bank just work it all out for you so you can pay the same amount each month for the duration of the loan and pay it all off. That is why if you pay it off earlier or make over payments then overall you pay less interest. It goes something like this (numbers are approximate):

Month 1: Borrowed £35,000. Interest after one month: £466. Paid: £566. 
Month 2: Owe (£35,000+£466-£566) £34,900. Interest added: £465. Paid £566.
Month 3: Owe (£34,900+£465-£566) £34,799. Interest added: £464. Paid £566.
-
Month 60: Owe £23,864. Interest added: £308.77. Paid £566
Month 120: Owe £559. Interest added: £7. Paid £566
Month 121: Owe £0.

Each month that you pay you owe slightly less and accrue slightly less interest. If you stop paying then the interest is still added so the balance goes up.

Month 6: Owe £34,383.78. Interest added: £459.87. Paid £0
Month 7: Owe £34,949.78. Interest added: £466.00 Paid £0
Month 8: Owe £35,415.77. Interest added: £472.21. Paid £0

CXG1979

pmartin86 said:

You also need to remember that a 6-month payment break is not equal to a 6-month interest break, that will have probably cost you dearly.

You're right - it has - it extended the loan period by 20 months, which they DID NOT make clear at the time. Grrr. Very annoyed at myself; had I have known I probably wouldn't have done the full 6 months.

CXG1979

superbigal said:

To add to the above.  It is worse because what you see as a good APR at 16%  is to most people an awful APR.  Particularly as it is not a short term loan.

I sorely regret this now for sure.  They do not have an easy process for overpayments - you cannot add odd amounts here and there and chip away at it, you have to pay in lump sums......highly annoying