Post Office Loan - early repayments

KerrisJones

I've contacted the post ofice today to ask to make an early payment. I've been told I can't becasue I have already paid off all of the interest, although this is a 60 month loan I've only had for 24 months. Is this right? Doesn't the interest get calculated over the term of the loan? The paperwork says I can make early repayments and save interest?

CliveOfIndia

Yes, interest is calculated (usually monthly, though it can vary) over the term of the loan.  It doesn't make sense to say you've already paid off all the interest - either you've misunderstood what they told you, or they misunderstood what you asked them.

Are you talking about making a one-off extra payment, or are you wanting to repay the whole loan?  If the latter then ask them for a settlement figure, this will detail what the settlement amount will be and how it's broken down.

KerrisJones

Hi CliveofIndia - thanks for your response. I wanted to make a part payment but was told I couldn't because the interest is already paid off. I asked her to check with her manager and she came back and said "although it shouldn't be allowed", I could make a part payment via bank transfer but I wouldn't save any interest!? I've paid off loans early before and always saved interest.

CliveOfIndia

That's not correct - sounds like the person you spoke to doesn't know what she's talking about.

The only way you could have already paid off all the interest due for the whole term of the loan would be if the interest was front-loaded - which is illegal.

It may be confusion over the effect of an additional payment.  When you make an additional payment, one of two things can happen.  You either carry on making the same monthly payments but the term is reduced, or the term stays the same but the monthly payments reduce.  Most people choose to carry on with the same payments but for a reduced length of time, though do check what their default approach is.  But you should be able to request either approach.

Unless they have illegally front-loaded the interest (which I really can't believe is the case) then you will save interest by making an additional payment.

ManyWays

dDid you speak to the Post Office? They are normally just a broker. Most of their loans come from Bank of Ireland so I suggest speaking to BoI directly,

amck75

I have the exact same problem, my loan is with AA though which is also Bank of Ireland, I borrowed 10k over 84 months, have so far
paid back almost £3600 in the last 21 months but my settlement figure is £10417, so still more than I actually borrowed.

Nasqueron

amck75 said:

I have the exact same problem, my loan is with AA though which is also Bank of Ireland, I borrowed 10k over 84 months, have so far
paid back almost £3600 in the last 21 months but my settlement figure is £10417, so still more than I actually borrowed.

That is the nature of a very long term loan with high rates of interest

molerat

Nasqueron said:

amck75 said:

I have the exact same problem, my loan is with AA though which is also Bank of Ireland, I borrowed 10k over 84 months, have so far
paid back almost £3600 in the last 21 months but my settlement figure is £10417, so still more than I actually borrowed.

That is the nature of a very long term loan with high rates of interest

Poster has their own thread which suggests they have not been given a settlement figure but the amount left to pay figure, settlement should be around £8.5K.