Paying off loan early - advice please

DiscoDuck

Hello everybody,

I took out a £3000 loan in Feb last year, so I am just over halfway through the term. I am now in a position to pay it off with savings I have built up, but when I asked for a settlement figure to pay it off now I was told I would only save £26 by paying it off early because the full amount of interest was added on at the start of the term. This was not made clear to me when I took it out, I was just told that I would be charged to pay it off early. Is this allowed?

Thanks

CLAPTON

no it isn't true that all the interest is added at the beginning.

it is of course obviously true that at the beginning of the loan the actual interest is higher as you owe more money and so as the loan progresses the element of interest declines so at the half way mark much more than half the interest has been paid.

however without knowing the details of the loan and the settlement figure its not possible to comment further.

DiscoDuck

I took the loan out over 24 months, and am 13 months into it. I asked if that meant I would save 11 months interest but the customer service representative said no because the interest had "already be loaded on".

CLAPTON

the operative is incorrect.. but the rebate may be less than you think and a lot less than half (as I've already said)
surely the details of the loan showed you the settlement situation at 1/4 , 1/2 and 3/4 of the way through?

if you wish to say the following I'll work it out approx rebate

amount of loan
number of months for the loan
monthly payment
APR

and how payment have you made?
do you have a settlement figure in writing

I'm assuming you have no PPI and have no missed payments etc.

DiscoDuck

They were rubbish and did not provide any statement until I requested one at the halfway mark, basically this shows the original loan amount, the interest amount, the insurance amount and the insurance interest amount, then the payments I have made. To be honest the loan isn't for that much so I'm not sure it's worth paying off now, I might as well leave the money in my savings account, but I just wanted to make sure that I wasn't getting really ripped off. Thanks for the help :cheesy:

Stella1971

Sorry for jumping in your thread but I'm in the same situation.
Wonder if Clapton could have a look please!

Mint Loan £10,000
24 months @ £469.00
APR 12.3% (I think, if not 12.5%)
Total loan was £11,263

Made 14 payments so far

Outstanding amount £4693.00

Called Mint for a settlement figure, was told £4662.00, asked twice if this
was correct.

Got a 10 month 0% interest deal from MBNA today, 3% fee, wanted to take
advantage and pay the loan off, won't bother if I'll only save £31!

Thanks in advance

CLAPTON

Stella1971 wrote: »

Sorry for jumping in your thread but I'm in the same situation.
Wonder if Clapton could have a look please!

Mint Loan £10,000
24 months @ £469.00
APR 12.3% (I think, if not 12.5%)
Total loan was £11,263

Made 14 payments so far

Outstanding amount £4693.00

Called Mint for a settlement figure, was told £4662.00, asked twice if this
was correct.

Got a 10 month 0% interest deal from MBNA today, 3% fee, wanted to take
advantage and pay the loan off, won't bother if I'll only save £31!

Thanks in advance

The settlement figure seems a little high after 14 payments .. but broadly about right .. was the settlement figure in writing?

Stella1971

CLAPTON wrote: »

The settlement figure seems a little high after 14 payments .. but broadly about right .. was the settlement figure in writing?

Not in writing, they did ask if I wanted them to but I didn't think it was worth it.

On my original contact it does state if half the term had passed it would be 5,342.00
I've made two more payments of 469.00 since then, just thought the settlement would
be lower.

CLAPTON

interestingly my spreadsheet says the settlement figure after 12 months should be about 5391 which is slightly higher than you quote but that after 14 payments should be 4535 which is significantly lower than their quote of 4662 so yes the figure does seem too high.

mister_bojangles

DiscoDuck, one trick that I use is to pay a lump sum, rather than seek to clear the debt. So if the balance is £1250, I pay up £1000. That way, the interest on the balance is less. When the payment is credited, call them to seek to know your balance. It works out cheaper.

Stella1971

CLAPTON wrote: »

interestingly my spreadsheet says the settlement figure after 12 months should be about 5391 which is slightly higher than you quote but that after 14 payments should be 4535 which is significantly lower than their quote of 4662 so yes the figure does seem too high.

Thanks again.

I took the loan out Dec 16th 06, but they didn't take out the first payment until Feb 15th 07, could this make any difference, or is it worth calling them
again?