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    • exhaustedbrit
    • By exhaustedbrit 19th Aug 19, 11:23 AM
    • 8Posts
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    exhaustedbrit
    Early Repayment
    • #1
    • 19th Aug 19, 11:23 AM
    Early Repayment 19th Aug 19 at 11:23 AM
    I'm wondering whether the following is reasonable, as it doesn't feel right to me but it might just be my fault for not reading the small-print.

    I borrowed 3,000 from lender X just over 5 months ago over 36 months at an interest rate of 41.06% pa fixed. At the time I understood that early repayments are allowed. However my early settlement figure quoted was much higher than 3,000.

    Through the money advice service live chat, the representative suggested that this could be due to 'front-loaded' interest, however as I understand it, with a full early settlement I should only pay the remaining principal balance plus a maximum of 58 days interest as the contract was more than a year.

    Am I barking up the wrong tree, should I suck up and pay the early settlement figure?
Page 1
    • BoGoF
    • By BoGoF 19th Aug 19, 11:27 AM
    • 5,133 Posts
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    BoGoF
    • #2
    • 19th Aug 19, 11:27 AM
    • #2
    • 19th Aug 19, 11:27 AM
    What was the total amount repayable, including interest? What was the settlement figure quoted?
    • exhaustedbrit
    • By exhaustedbrit 19th Aug 19, 11:30 AM
    • 8 Posts
    • 1 Thanks
    exhaustedbrit
    • #3
    • 19th Aug 19, 11:30 AM
    • #3
    • 19th Aug 19, 11:30 AM
    The total amount repayable including interest 5,262.99.

    The quoted early settlement figure was 3,740.00.
    • BoGoF
    • By BoGoF 19th Aug 19, 11:44 AM
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    BoGoF
    • #4
    • 19th Aug 19, 11:44 AM
    • #4
    • 19th Aug 19, 11:44 AM
    Defo seems to high - what does your loan agreement say about early settlement. It isn't a business loan?
    • exhaustedbrit
    • By exhaustedbrit 19th Aug 19, 12:13 PM
    • 8 Posts
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    exhaustedbrit
    • #5
    • 19th Aug 19, 12:13 PM
    • #5
    • 19th Aug 19, 12:13 PM
    It's not a business loan no, it reads:

    Where you settle your agreement early, the full amount of interest
    which would have been payable up to the end of the loan is payable,
    less any statutory rebate to which you may be entitled.
    • BoGoF
    • By BoGoF 19th Aug 19, 12:39 PM
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    BoGoF
    • #6
    • 19th Aug 19, 12:39 PM
    • #6
    • 19th Aug 19, 12:39 PM
    If you google 'early repayment loan calculators' there are various out there. They do give slightly differing results but 2700/2800 would be about right.

    The loan is regulated by CCA 1974?
    • mattvolatile
    • By mattvolatile 19th Aug 19, 12:52 PM
    • 95 Posts
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    mattvolatile
    • #7
    • 19th Aug 19, 12:52 PM
    • #7
    • 19th Aug 19, 12:52 PM
    Try the Amortization Calculator here for an illustration:

    https://www.amortization-calc.com/loan-calculator/

    I plugged your figures in -- it suggests you're repaying about 146 per month. Assuming your loan started in March, your current balance is 2715, so I'm not surprised that your settlement figure is close to 3k. It doesn't look like there's a "front loading" issue here; it's just that obviously your monthly interest accrued is very large on the opening balance.

    As you'll see from the table, because the interest rate is so high, at the moment twice as much of your monthly repayment is going to interest than principal.
    • mattvolatile
    • By mattvolatile 19th Aug 19, 1:02 PM
    • 95 Posts
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    mattvolatile
    • #8
    • 19th Aug 19, 1:02 PM
    • #8
    • 19th Aug 19, 1:02 PM
    (Just to add, because I missed it: the 1,000 over your principal does seem a little high -- ask for a full breakdown of the calculation, so you can see where they're stinging you? Looks like there are some fees in there somewhere....)
    • iolanthe07
    • By iolanthe07 19th Aug 19, 2:04 PM
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    iolanthe07
    • #9
    • 19th Aug 19, 2:04 PM
    • #9
    • 19th Aug 19, 2:04 PM
    41.06% pa fixed

    Does 'fixed' mean the same as Flat Rate? If so, your APR is somewhere around 80%!
    I used to think that good grammar is important, but now I know that good wine is importanter.
    • Nearlyold
    • By Nearlyold 19th Aug 19, 2:21 PM
    • 1,380 Posts
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    Nearlyold
    Lenders often use the term "fixed" when quoting the Flat rate.

    OP look through your agreement for the APR, as iolanthe07 has said I bet its somewhere around 80%
    • mattvolatile
    • By mattvolatile 19th Aug 19, 2:41 PM
    • 95 Posts
    • 92 Thanks
    mattvolatile
    Lenders often use the term "fixed" when quoting the Flat rate.

    OP look through your agreement for the APR, as iolanthe07 has said I bet its somewhere around 80%
    Originally posted by Nearlyold
    It's not. He quoted the total loan amount above, 5,262.99, which matches the APR he provided of about 41%.
    • Nearlyold
    • By Nearlyold 19th Aug 19, 4:27 PM
    • 1,380 Posts
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    Nearlyold
    It's not. He quoted the total loan amount above, 5,262.99, which matches the APR he provided of about 41%.
    Originally posted by mattvolatile
    Yes you're right of course, must admit to my shame I never checked the figures as short of time.

    Still can't get anywhere near the OP's settlement figure though, two months interest would be 200 tops. Perhaps there was some sort of payment holiday at the start of the loan?
    • mattvolatile
    • By mattvolatile 19th Aug 19, 5:05 PM
    • 95 Posts
    • 92 Thanks
    mattvolatile
    It can't be that this figure is "full interest payable" as the OP suggests, because that would be over 2,000 pounds. So the question is: how is the statutory rebate calculated under the CCA, and does that get us to this figure? I can't see that it does, really, and that the OP's settlement figure is a few hundred pounds too much... No?

    This obviously isn't a case of "front loading" because the sums work for an amortization, but I think OP should definitely ask the lender how that figure has been arrived at, given that it should be in the region of 3k flat.

    Playing here http://www.financecalcs.co.uk/Calcs/Settlement.php also gives a figure c. 3k (actually slightly under) for the "actuarial method".
    Last edited by mattvolatile; 19-08-2019 at 5:17 PM.
    • exhaustedbrit
    • By exhaustedbrit 19th Aug 19, 5:38 PM
    • 8 Posts
    • 1 Thanks
    exhaustedbrit
    Just an update, I've approached the lender to ask for a breakdown of the figure. I can't see any mention of early repayment fees in the credit agreement, which says that its regulated under the CCA 1974 at the top. Will update when I hear back.
    • Nearlyold
    • By Nearlyold 20th Aug 19, 6:46 AM
    • 1,380 Posts
    • 1,241 Thanks
    Nearlyold
    So the question is: how is the statutory rebate calculated under the CCA, and does that get us to this figure?.
    Originally posted by mattvolatile
    The rebate is calculated thus:-

    When a customer requests a full or partial early settlement the lender has to calculate a rebate of interest charges that would have otherwise been charged if the loan had continued as before. In calculating this rebate the assumed date of the full or partial early settlement is 28 days after the request or 58 days after (at the lenders discretion) if the loan has more than 12 months to run. (It is the "Post Dating" of the rebate calculation that gives rise to the 1 or 2 month "interest charge")

    The customer then has 28 or 58 days in which to make the payment, if they make the payment earlier than the 28 or 58 day deadline the lender does not have to adjust the rebate of interest calculation already made, the customer is simply giving the lender some free working capital for a period.

    But as already stated this wouldn't give rise to the level of charge in the OP's case
    • exhaustedbrit
    • By exhaustedbrit 20th Aug 19, 8:17 PM
    • 8 Posts
    • 1 Thanks
    exhaustedbrit
    Thanks for all of your responses, turns out I was right to be cautious. The figure they provided was incorrect and was for a different loan account apparently, they recalculated for me and it came to just over 3,070.
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