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    • periwinkleperkins
    • By periwinkleperkins 11th Aug 18, 6:17 AM
    • 6Posts
    • 0Thanks
    Personal Loan Interest Query
    • #1
    • 11th Aug 18, 6:17 AM
    Personal Loan Interest Query 11th Aug 18 at 6:17 AM
    Iím trying to understand how the interest works on a personal loan....

    I took out a loan in May 2017 to consolidate some debts. The amount borrowed was £15,500 and total amount payable was around £22,000 (60 months at £367 per month).

    In October, I went onto a token payment plan due to leaving work through ill health and the bank offered to freeze interest whilst I was making payments of £1 per month.

    In February 2018, the bank defaulted my account and the amount owing was £21,000 which is roughly equal to the original loan plus interest for 5 years minus the payments I had made.

    My first question is, if interest was frozen from October whilst I was on a TPP why isnít the default balance the same as the settlement figure at that point in time (ie includes reduction for interest rebate to end of term)?

    My second question is, I am now on a DMP and the bank will be receiving roughly £700 per month which will clear the total balance 1 year before the end of the original planned term so will that early repayment generate an interest rebate if Iím not due anything from question one?
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    • Craig1981
    • By Craig1981 11th Aug 18, 6:45 AM
    • 674 Posts
    • 333 Thanks
    • #2
    • 11th Aug 18, 6:45 AM
    • #2
    • 11th Aug 18, 6:45 AM
    Good morning
    I believe as you are paying a higher amount, the defaulted payments would be "taken back " first, then additional payments over your usual monthly payments would reduce interest, and yes, reduce the total mount of the loan

    you say you are in a DMP - as this was a consolidated loan, is this the only amount on the DMP?
    if is, why use a DMP at all? speak to your bank to reset the terms and what is needed, and take it from there.

    if other debts as well, are you paying for the DMP? places like Payplan, offer this service for free, saving you hundreds in costs
    • periwinkleperkins
    • By periwinkleperkins 11th Aug 18, 7:18 AM
    • 6 Posts
    • 0 Thanks
    • #3
    • 11th Aug 18, 7:18 AM
    • #3
    • 11th Aug 18, 7:18 AM

    Thanks for the advice b

    Originally I had about 12 creditors at high APRs, so I took out a loan but could only consolidate 3 creditors.

    Then a year later I took out another loan and consolidated 7 more creditors, so now I have 2 loans and 2 credit cards on the DMP with StepChange so no charges.

    I looked at my other loan and they were adding interest monthly until the default (no interest since) and the initial amount on the credit file was the same as the amount borrowed.

    So it seems two banks are approaching this with two different methods... just seems unfair that both say they!!!8217;ve stopped interest but once gets paid back everything they were owed (including interest to end of term) under the original terms and the other just gets interest to point of default plus principle sum repaid.
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