Loan via lendable

Sparkleon

My maths is sketchy at best so I am hoping someone can help. Back in early July, I took out a £10,000 loan via clearscore - lendables to consolidate debts. The agreed amount I would pay in total was £13,030.17 over 36 months. This amount is the sum of: (i) the Loan Amount; (ii) the Loan Fee; and (iii) the interest payable. The APR is 19.63%. 35 payments of £361.83 with the final payment being £366.12. 

I have been paying the amount each month since and paying off extra as and when I can. I was looking at my statement today, history of payments and what not to find that they are taking a lot more interest than they should?! The interest that I am paying, isnt coming off my balance but my loan amount includes the interest - if that makes sense? Is that normal? I've never taken a loan out before. This is my payment history - not all of it but a bit so you can understand :

05/09 - DD - £361.83. Interest - £119.72. Principle - £242.11 = 33% / Balance - £9840.47
05/09 - extra payment - £115.00. Interest - £0. Principle - £115.00 = 0% / Balance - £9725.47
20/09 - extra payment - £1000. Interest - £55.71. Principle - £944.29 = 5.571% / Balance - £8781.18
5/10 - DD - £361.83. Interest - £50.30. Principle - £311.53. = 13.9% / Balance - £8469.65
08/10 - extra payment - £250.00. Interest - £9.68. Principle - £240.32 = 3.872% / Balance - £8229.33
05/11 - DD - £361.83. Interest - £88.21. Principle - £273.62 = 24.37% / Balance - £7955.71
09/11 - extra payment - £264.00. Interest - £12.13. Principle - £251.87 = 4.59% / Balance - £7703.84
05/12 - DD - £361.83. Interest - £76.65. Principle - £285.18 = 21.18% / Balance - £7418.66

I paid more interest on the DD payment of £361.83 than I did on the £1000 extra payment. Is that normal? Can anyone help me with this?

Thanks in advance

TadleyBaggie

It's totally normal, at the start of the loan repayment the interest portion is at its highest (because the balance is high). As the balance reduces then the amount of interest also reduces.

Sparkleon

TadleyBaggie said:

It's totally normal, at the start of the loan repayment the interest portion is at its highest (because the balance is high). As the balance reduces then the amount of interest also reduces.

Thank you. Is it normal that the interest isnt being taken off my balance? despite the balance including the interest?

Thanks again, 

MorningcoffeeIV

The balance doesn't include interest. It's added on each month.

Sparkleon

MorningcoffeeIV said:

The balance doesn't include interest. It's added on each month.

but it says in the contract : 

"This amount is the sum of: (i) the Loan Amount; (ii) the Loan Fee; and (iii) the interest payable".

MorningcoffeeIV

That's what you'll pay if you go full term.

Interest is never front loaded. It's calcuated on a daily basis on th eoutstanding balance.

Brie

No what it says (according to your first post) is The agreed amount I would pay in total was £13,030.17 over 36 months. This amount is the sum of: (i) the Loan Amount; (ii) the Loan Fee; and (iii) the interest payable.

So if you paid according to their schedule you would pay £13k+ over 3 years which would be the combined total of the amount lent to you, the fee for setting up the loan and the interest.  Because you are overpaying the interest should be less but you'll still pay in full for the principle and the fee.

I would ask them to give you a revised total of what you might owe over the remainder of the loan period so you know properly what affect the overpaying is doing for you.

Sparkleon

MorningcoffeeIV said:

That's what you'll pay if you go full term.

Interest is never front loaded. It's calcuated on a daily basis on th eoutstanding balance.

Ahh I see. Thank you very much for your help

Ebe_Scrooge

Loan statements can often be a little confusing.  To summarise, and hopefully clarify:

The initial illustration you're given assumes that the loan will run its full term - i.e. you'll make 36 monthly payments.  If that's the case, the total amount you'll end up paying would be £13,030.17 (principle + fees + interest).

Interest is never front-loaded - that practice was made illegal many years ago.  Interest is calculated on a daily basis, based on the outstanding balance.  To start with, each payment you make will be mostly paying off interest, with only a bit of it going towards the principle amount.  As the principle amount gradually decreases, so will the interest that's calculated each day, so more of your payment goes towards the principle.

If you make overpayments, you'll reduce the principle amount, so you'll pay less interest next month.  But come what may, you have to repay the initial £10,000 you borrowed (plus fees if applicable), it's just the interest on top that will vary.

Let's say you've borrowed £1000 at 10%, and your monthly payments are £150.  First month, you're charged interest of £100.  So of your £150 payment, £100 of it goes towards interest, only £50 goes toward the principle, so you now owe £950.

Next month you're charged interest of £95 (10% of £950).  So this time when you make your £150 payment, you pay off £95 interest, and £55 off the principle, so you now owe £895.  So each month you pay off less interest and more of the principle.

Now, in the first month, let's say you pay £300 instead of the £150 you're supposed to.  You're still charged £100 interest for that month, but now you've paid £200 of the principle, not just £50 as per the original example.  So you now owe £800.

Month 2, you're only charged £80 interest (10% of £800), not £95.  So (whatever amount you pay), £15 more of it goes to reducing the principle than it would have otherwise done.

Not sure if this helps or confuses things further!  This illustration is greatly over-simplified, but the principle is exactly how it works in real life.

Sparkleon

Ebe_Scrooge said:

Loan statements can often be a little confusing.  To summarise, and hopefully clarify:

The initial illustration you're given assumes that the loan will run its full term - i.e. you'll make 36 monthly payments.  If that's the case, the total amount you'll end up paying would be £13,030.17 (principle + fees + interest).

Interest is never front-loaded - that practice was made illegal many years ago.  Interest is calculated on a daily basis, based on the outstanding balance.  To start with, each payment you make will be mostly paying off interest, with only a bit of it going towards the principle amount.  As the principle amount gradually decreases, so will the interest that's calculated each day, so more of your payment goes towards the principle.

If you make overpayments, you'll reduce the principle amount, so you'll pay less interest next month.  But come what may, you have to repay the initial £10,000 you borrowed (plus fees if applicable), it's just the interest on top that will vary.

Let's say you've borrowed £1000 at 10%, and your monthly payments are £150.  First month, you're charged interest of £100.  So of your £150 payment, £100 of it goes towards interest, only £50 goes toward the principle, so you now owe £950.

Next month you're charged interest of £95 (10% of £950).  So this time when you make your £150 payment, you pay off £95 interest, and £55 off the principle, so you now owe £895.  So each month you pay off less interest and more of the principle.

Now, in the first month, let's say you pay £300 instead of the £150 you're supposed to.  You're still charged £100 interest for that month, but now you've paid £200 of the principle, not just £50 as per the original example.  So you now owe £800.

Month 2, you're only charged £80 interest (10% of £800), not £95.  So (whatever amount you pay), £15 more of it goes to reducing the principle than it would have otherwise done.

Not sure if this helps or confuses things further!  This illustration is greatly over-simplified, but the principle is exactly how it works in real life.

Thank you so much. I wanted to know so I could see how much id have to pay roughly to get it paid off quicker... but I think I have sorted it now so thank you for your detailed response. I understood