AA Loan Front Loaded interest

amck75

Hi, i took out a £10000 loan over 84 months with AA in 2022, the monthly repayment was £168.03 no deferral period and interest rate 10.9%. Ive made 21 payments so far totalling £3528.63. I've been given a settlement figure of £10417 which is more than I borrowed, so basically every paymemt I've made so far has been 100% interest. I know that you pay more to the interest at the start of a loan but surely not the entire amount! How can  they get away with this!!!!

molerat

Interest is not front loaded, it is not legal to do so.  It looks like the figure you have been given is how much you will pay going forward until the end of the loan, 62 x £168.03 = £10417.  Settlement should be around £8500. I suspect some crossed wires here, did you actually ask for a settlement figure ?

CliveOfIndia

Just to add to the good advice above, do remember that they are allowed to charge an early settlement fee of up to 2 months-worth of interest.

But yes, front-loading of interest is illegal - if you settle early, you will save money in interest overall.