Cancelling ppi-loan repayments go up!

karenl_3

I wrote to the Alliance and Leicester to cancel the ppi (£45 for cover, loan payments £236) on a £12,000 loan we took out with them in March as I had found considerably cheaper cover through this website, and was astounded when they wrote back saying we could cancel it but our loan payments would increase to £249.

I have read the loan agreement over and over to see if I'd missed this condition of the loan.

When we originally applied for the loan, advertised at 5.9%, we were offered a loan at 8.9%. We didnt do anything about because our bank offered us the same. A&L contacted to find out why we hadnt accepted their loan and within the space of a few minutes offered us a 6.9% rate, whether this has something to do with the repayment increase.

Has anyone had expereienced this?

Xbigman

What they might have done is cancelled the loan and replaced it with another at a higher APR. They should have told you that if this is the case. Write and ask them why the payments went up.

Also, you probably paid for the PPI up front and they added it to the loan (and charged you interest). If you wanted the cover anyway you should have kept it going until you had a very close look at the numbers. Its possible you just threw away some money on the PPI (and are now on a higher APR).

Sorry, but the thing to do is take out independent PPI when a loan is set up and not try to cancel something you already paid for. There is a rebate on the interest on the PPI but its not enough to make a difference in most circumstances.



Regards




X

karenl_3

Thanks. I havent cancelled it yet what can I do to remedy the situation.

Xbigman

1. Ring up and find out if they are cancelling the loan and replacing it with another, thus putting up the APR on the loan if you cancel the PPI. If they are you are stuck with it.

2. If they are not putting your APR up then dig out your loan agreement. Did you pay the PPI up front and was it added to your loan? If so you will get a rebate on the PPI but it is not very big. Ring up and find out what the rebate will be. If the rebate is more than the cost of alternative PPI (which is unlikely but possible) then you can cancel and take out the independent cover. If not, or if its very close, then stay where you are.
Regards




X

Robert_Sterling_3

What is the loan companies reason for increasing your monthly repayments.

Perhaps the loan offer was 6.9% if you take their PPI.

brokenwings

i have just cancelled my loan ppi with a&l and my payments have gone DOWN £25 per month.

newmum1

i think every bank varies i tried to cancel my ppi with barclays and was told that i could not as you only have 14 days to cancel it and that my only way round it would be to take another loan with them which would be at a higher apr so im stuck paying for it.

MarkyMarkD

You can't cancel the PPI from inception - it's a one-off premium. If you cancel mid-term, you get a rebate which, as Xbigman points out, is nowhere near proportionate. Cancelling is very bad value - the sensible thing is not to take it out, if you don't really want it.

If you do attempt to cancel PPI on a loan with most lenders, they will actually cancel the entire loan and refinance it. That will then mean that your rate will be reassessed based on what they are currently offering (and, possibly, their current view of your creditworthiness, but they won't necessarily re-credit score you if it's a like for like refinance of an existing loan).

So, you could either benefit or lose out - the 5.9% rate was the lowest A&L ever offered, if I remember rightly, and it's not currently available as the current typical rate is 6.4% - so if the original was at 5.9% you would almost definitely incur an increase on the loan itself, even if you saved something on the PPI.

Presumably brokenwings was originally paying more than 6.4%?