Early repayment

Tobyredtyke

I have recently taken out a loan for £7500 but have the funds to clear it. The lender is asking for £12000 to clear the debt even though I only took it out 2 months ago. Does this sound correct?

mebu60

Who is the lender? What was the term of the loan? What do the Ts&Cs say about early redemption? 

cymruchris

Tobyredtyke said:

I have recently taken out a loan for £7500 but have the funds to clear it. The lender is asking for £12000 to clear the debt even though I only took it out 2 months ago. Does this sound correct?

It depends on what you signed up to. As above, if you let us know the loan provider, someone here might be able to give you an insight.

sammyjammy

Thats v v steep.  Not allowed to front load a loan but there maybe an early repayment fee.

CliveOfIndia

This doesn't sound right.  Front-loading of interest is not legal, so it's not like they can ask you to pay all the interest you would have paid if the loan had run its full term.

Tobyredtyke said:

The lender is asking for £12000 to clear the debt

Is that actually a settlement figure they've given you, or is that just the "total amount payable" that was on your original paperwork?  If the latter, then that's just showing you what you'll pay overall if the loan runs for the full term originally agreed.  You need to ask them for an actual settlement figure, which will be valid for a specified number of days (I think it's usually something like 21 or 28 days, but I'm not sure offhand - but it will be specified on the documentation they send you).

A lender is entitled to charge up to 2 month's worth of interest as an early settlement penalty (1 month if there's less than 12 months left on the loan), but they can't charge any more than that.

Tobyredtyke

The loan was with Lloyds bank over 7 years

macman

Lloyds? And I was thinking that perhaps the lender had a large angry dog and was carrying a baseball bat...
What is the APR and what does your loan agreement say about early repayment? We can't see it.

cymruchris

Tobyredtyke said:

The loan was with Lloyds bank over 7 years

So have you spoken to them to get your figure ? Or are you just looking at your original paperwork? You’ll need to give a few more details if you want to get proper advice. 

retiredbanker1

If you borrowed £7500 and they are quoting you £12000 to repay early there is a clear error here.

Not sure if you asked the right question and Lloyds got confused but if you ask them for a redemption figure then you will be given the right amount.