loans early repayment

viva_2

I am a newbee to this site an would appreciate some advice re early repayment of a loan.
Got a loan of 20,000 from A&L
APR 9.9%
term -60months
monthly repayments 420.17
WAs told on getting the loan that early repayment fee is one months interest.
i am 2 months into the loan and would like to repay because i have been offered a cheaper loan by wesleyan for 7.2% APR and no repayment fee. I would like to repay early and i am most likely to repay within a year.

However on asking A&L for a resettlement figure i was given a figure of 20,285. inspite of the fact that i have made 2 repayments of 420.17 twice.
A&L unwilling to explain how the figure was arrived at .
Questions-:
1)Are the charges fair though they look rather extortionate.
2) Is it worth switching to a cheaper lender to save n the interest.

CLAPTON

was there any PPI
was there any payment free months at the beginning of the loan?

viva_2

No there was no ppi
Spoke to A &L this am they said the interest on the loan was front loaded.
I think they were deliberately misleading as i specifically asked the question prior to obtaining the loan.

viva_2

No payment free months as well

Spire128

Hi

Well according to my calculations they are correct what thay have quoted as the settlement figure.

I would say that they have arrived at this figure by using the Office of Fair trading formula for calaculating early settlment figures, which is the formula that I have used.

I think that the figure is so high because the intrest is front loaded, so your repayments to date will have be mostly intrest payment, and very little of the orginal loan value with have been paid back.

CLAPTON

viva wrote: »

No there was no ppi
Spoke to A &L this am they said the interest on the loan was front loaded.
I think they were deliberately misleading as i specifically asked the question prior to obtaining the loan.

the term 'front loaded' is a little misleading.

obviously at the beginning of the loan you owe the full amount so the monthly interest is high simply reflecting the fact you owe a lot of money. As the months/years go by, the capital owed reduces and so the monthly interest reduces.

viva_2

does that mean i have not paid any bit of the loan off and is it worthwhile to switch to the other loan with a 7.2% apr.

viva_2

Do all loans have interest front loaded and what does no early repayment charge mean

dannynixon

No they do not and it means that you will not be charged a penalty for finishing early. Some loans may charge you 2 months interest extra for finishing early

CLAPTON

viva wrote: »

Do all loans have interest front loaded and what does no early repayment charge mean

All ordinary (unsecured) loans taken out after May 2005 have to calculate the settlement figure in accordance with the CCA regulations.

If you call that front loaded then all loans are front loaded and if you don't call that front loaded then no loans are front loaded.

In addition, for loans taken out for more than 12 months they are allowed to add a penalty of up to a months interest...... effectively this means that from the time you ask for a settlement figure there is two month interest to pay.
Some lenders do not apply the extra month interest and so can say there is no early settlement charge.

viva_2

So basically there is very little difference between both loans apart from the apr which for A&L is 9.9% and for wesleyan is 7.2% .
Still not sure if it is worth the swap taking into account the amount of intrest i ould have to pay if i settled early with A&L