Car finance issue

overthehylts

overthehylts said:

MattMattMattUK said:

overthehylts said:

MattMattMattUK said:

overthehylts said:

Thanks for coming back to me 

the initial term was for 5 years i paid the 4k about a week after i signed the agreement I believe the reason the apr is so high is because i have a iva 

Just for clarity, you borrowed £10,000, then paid off £4,000 within a few weeks, theoretically leaving a balance of £6,000? What does the contract say on early repayment, any allowances or penalties? Was interest on the £10,000 front loaded or calculated on a rolling monthly basis?

On early repayment it says the agreed amount doesnt change so i keep paying £327.84 but the time of paying of the loan decreases

So it specifically says that the term will decrease if one makes an early repayment? 

overthehylts said:
i believe the interest was calculated on a rolling monthly basis

It would be worth double checking, it is also going to be worth checking that the £4,000 actually shows as it seems they are proceeding as if that payment was not made. Do you have monthly/annual statements from the lender? 

Who was the lender and what specifically is the agreement, is it a unsecured loan, a secured loan, HP, PCP etc.?

On the annual statement it shows the 4k but doesnt look like it has been taken of the balance the agreement is  hp

The company is moneybarn

CliveOfIndia

overthehylts said:

I believe the reason the apr is so high is because i have a iva 

Did you get authorisation to take out the loan?  Even if you did, I have to observe that taking on further credit whilst on an IVA is not exactly the most financially prudent move.

overthehylts

CliveOfIndia said:

overthehylts said:

I believe the reason the apr is so high is because i have a iva 

Did you get authorisation to take out the loan?  Even if you did, I have to observe that taking on further credit whilst on an IVA is not exactly the most financially prudent move.

Yes the iva company approved the purchase

MattMattMattUK

overthehylts said:

MattMattMattUK said:

overthehylts said:

MattMattMattUK said:

overthehylts said:

Thanks for coming back to me 

the initial term was for 5 years i paid the 4k about a week after i signed the agreement I believe the reason the apr is so high is because i have a iva 

Just for clarity, you borrowed £10,000, then paid off £4,000 within a few weeks, theoretically leaving a balance of £6,000? What does the contract say on early repayment, any allowances or penalties? Was interest on the £10,000 front loaded or calculated on a rolling monthly basis?

On early repayment it says the agreed amount doesnt change so i keep paying £327.84 but the time of paying of the loan decreases

So it specifically says that the term will decrease if one makes an early repayment? 

overthehylts said:
i believe the interest was calculated on a rolling monthly basis

It would be worth double checking, it is also going to be worth checking that the £4,000 actually shows as it seems they are proceeding as if that payment was not made. Do you have monthly/annual statements from the lender? 

Who was the lender and what specifically is the agreement, is it a unsecured loan, a secured loan, HP, PCP etc.?

On the annual statement it shows the 4k but doesnt look like it has been taken of the balance the agreement is  hp

I think you need to have a chat with them about how that 4k actually works because Hire Purchase is not something one can make a overpayment on in the same way as a loan, it does not work like that. The overpayment would not reduce the term, though it may reduce interest paid if it is counted against the balance. Do you know what the balloon payment is at the end of the HP agreement, does it depend on mileage, residual value etc? You might have to ask them how much it would cost to pay off the finance in full and then potentially use the £4k towards that, but there may also be a balloon payment that would swallow up the £4k regardless and leave you still needing to pay the monthly payments until 2025.

DrEskimo

MattMattMattUK said:

overthehylts said:

MattMattMattUK said:

overthehylts said:

MattMattMattUK said:

overthehylts said:

Thanks for coming back to me 

the initial term was for 5 years i paid the 4k about a week after i signed the agreement I believe the reason the apr is so high is because i have a iva 

Just for clarity, you borrowed £10,000, then paid off £4,000 within a few weeks, theoretically leaving a balance of £6,000? What does the contract say on early repayment, any allowances or penalties? Was interest on the £10,000 front loaded or calculated on a rolling monthly basis?

On early repayment it says the agreed amount doesnt change so i keep paying £327.84 but the time of paying of the loan decreases

So it specifically says that the term will decrease if one makes an early repayment? 

overthehylts said:
i believe the interest was calculated on a rolling monthly basis

It would be worth double checking, it is also going to be worth checking that the £4,000 actually shows as it seems they are proceeding as if that payment was not made. Do you have monthly/annual statements from the lender? 

Who was the lender and what specifically is the agreement, is it a unsecured loan, a secured loan, HP, PCP etc.?

On the annual statement it shows the 4k but doesnt look like it has been taken of the balance the agreement is  hp

I think you need to have a chat with them about how that 4k actually works because Hire Purchase is not something one can make a overpayment on in the same way as a loan, it does not work like that. The overpayment would not reduce the term, though it may reduce interest paid if it is counted against the balance. Do you know what the balloon payment is at the end of the HP agreement, does it depend on mileage, residual value etc? You might have to ask them how much it would cost to pay off the finance in full and then potentially use the £4k towards that, but there may also be a balloon payment that would swallow up the £4k regardless and leave you still needing to pay the monthly payments until 2025.

Whilst PCP is technically a form of HP, HP is generally referred to a form of car finance which essentially is just a secured personal loan. Therefore it won’t have a balloon payment, or be subject to mileage restrictions which affect any predicted residual value. 

So, I don’t see why the overpayment wouldn’t work in exactly the same way as a personal loan.

Nearlyold

MattMattMattUK said:

overthehylts said:

MattMattMattUK said:

overthehylts said:

MattMattMattUK said:

overthehylts said:

Thanks for coming back to me 

the initial term was for 5 years i paid the 4k about a week after i signed the agreement I believe the reason the apr is so high is because i have a iva 

Just for clarity, you borrowed £10,000, then paid off £4,000 within a few weeks, theoretically leaving a balance of £6,000? What does the contract say on early repayment, any allowances or penalties? Was interest on the £10,000 front loaded or calculated on a rolling monthly basis?

On early repayment it says the agreed amount doesnt change so i keep paying £327.84 but the time of paying of the loan decreases

So it specifically says that the term will decrease if one makes an early repayment? 

overthehylts said:
i believe the interest was calculated on a rolling monthly basis

It would be worth double checking, it is also going to be worth checking that the £4,000 actually shows as it seems they are proceeding as if that payment was not made. Do you have monthly/annual statements from the lender? 

Who was the lender and what specifically is the agreement, is it a unsecured loan, a secured loan, HP, PCP etc.?

On the annual statement it shows the 4k but doesnt look like it has been taken of the balance the agreement is  hp

I think you need to have a chat with them about how that 4k actually works because Hire Purchase is not something one can make a overpayment on in the same way as a loan, it does not work like that. The overpayment would not reduce the term, though it may reduce interest paid if it is counted against the balance. Do you know what the balloon payment is at the end of the HP agreement, does it depend on mileage, residual value etc? You might have to ask them how much it would cost to pay off the finance in full and then potentially use the £4k towards that, but there may also be a balloon payment that would swallow up the £4k regardless and leave you still needing to pay the monthly payments until 2025.

Since the introduction of the European Consumer Credit Directive (2011) all Regulated Consumer Credit including Personal Loans, Hire Purchase, Conditional Sale and the PCP variations of them must offer the ability to make overpayments/partial settlements should the borrower desire to do so - and must as a minimum grant a rebate of the Interest that would otherwise be paid (if there was no partial settlement) in line with the early settlement regulations.

The rebate calculation is the same whether the credit is Personal Loan, Hire Purchase, Conditional Sale or the PCP variations of them

The lender as a result of the partial settlement must also offer one of either a reduction in term or a reduction in future payments - there is no requirement to offer both options though lenders can offer both options if they wish to do so. 

Without sight of the statements it's not possible to ascertain what has happened in the OPs case. 

I wonder however if the OP actually informed Money Barn before making the overpayment (as is required) elsewise it may have been initially treated as a (rather large) payment on account. 

MrFrugalFever

I'm struggling to make sense of your numbers and situation. The key things here are 'Moneybarn', 'IVA' and 'car finance'.

From what you have suggested so far, it appears that you are likely to be on a Hire Purchase Conditional Sale (unregulated) without a Balloon (although a Balloon is possible if Moneybarn offer it).

If that is the case, you would have had to present the initial quotation and pre-approval to your IVA firm for them to hold a variation meeting with your creditors to gain acceptance.

If accepted, as you suggest, you would then continue to proceed with the application with Moneybarn, who would set up the agreement as a Secured loan against the asset (car) for the agreed amount of credit and term based on a set deposit (and mileage if balloon used).

If you are in an IVA, i'm not quite sure where the £4,000 lump sum has come in, but I digress.

When the agreement starts, typically 30 calendar days from point of funding payout, you would make your first direct debit payment. At that point, if you were to request a settlement letter from Moneybarn, you would then be presented 2 figures, the first being what is owed in total (amount of credit borrowed, inclusive of all interest but less the first months payment) and then the second figure, what is left is minus first payment and interest rebated (with up to 58 days worth of interest kept by Moneybarn under CCA1974). This would be LESS than the total amount of credit taken out. I suggest requesting a settlement figure (do not rely on statements or letters outside of this request), to understand exactly how much is now owed.

If you have had a balloon at the end of the agreement, perhaps your normal monthly payments had indeed finished in 2022 but you where then required to refinance the balloon? Can you remember agreeing to this or requesting this at all?

I'm wondering whether the following has happened....

1) The car cost £14,000

2) You paid a £4,000 deposit

3) You request £10,000 amount of credit with MoneyBarn to fill the gap in the purchase price of the car

4) Moneybarn, subject to IVA approval, has granted you £10,000 over 24 months (25th for balloon??) with an APR of 34.9%

5) You had a HP Balloon agreement, which means that the GMFV is a fixed amount and bears constant interest of 34.9%APR with no way of reducing that proportion of it

6) Due to the balloon, you have made in excess of £8,000 worth of payments which has simply been the gap between £10,000 and the balloon GMFV inclusive of interest

7) You are left with the GMFV to pay, which, under a Hire Purchase with Balloon agreement either A) MUST BE PAID or Car is sold prior to completion

8) You had not realised and have not considered the implication of the GMFV payment and therefore Moneybarn have continued the agreement further as no action was taken?

It is an odd one as somewhere along the line you would have had to agree to something! Did you set annual mileage on this agreement?