:mad:

 

Tell me if I am being stupid at any point in this farce...

 

Rang up AA to get a settlement figure on a £4,000 I took out earlier this year, 4 payments made so far.

 

Settlement figure quoted was £4,251.26 - ?!?!?!?

 

Surely I only pay interest on payments made whilst the loan is outstanding ie 4 months worth of payments? Eg If my payment is £130 then £40 or whatever is interest. The woman on the phone didn't really know what I was on about and kept saying she'd put it in writing and that interest was "top-loaded".

 

Now I'm financially minded but I've never heard of charging interest this way :confused:

 

Surely a proportion of each monthly payment I make goes towards paying off the capital?? Otherwise the loan amount outstanding would increase all the time instead of decrease??

 

Any thoughts?

 

Pete

I suppose it depends on whether there are any charges that get added to the loan at the beginning, or any commission paid to anyone, or if you had a deal where you paid a low rate for the first year or 2, increasing later.

Think it's fairly normal to have to pay all of the interest that you would have had over the entire course of the loan. Always struck me as a con too!

On the statements for my Natwest loan, the amounts paid off the capital, and the interest are listed seperately, so you can see how much capital ou have outstanding....It sounds to me like the AA are a bunch of winkers;)

 

On a somewhat related note if you can afford to pay off your loan, why not f*ck it off and spend the money on your Z instead?? e.g. Fuel and boost controllers and perhaps some enlarged turbo's might be nice!!:D :p :D

I expected replies along the lines of "spend it on your zed instead" :p

 

It is a bloody con :mad: And who can you kick off with - just a telesales person on the phone :rolleyes:

LOL Spoke too soon (or late!)

997...

998...

999...

pete shrimp

14.026s and dropping...

 

Registered: Aug 2002

Location: Dav

Posts: 1000!!!

 

Woohoo!! Happy 1000th post to me :cool: :D

Tesco calculate their interest the same way, by the way, so be warned..

 

I had a 13k loan with them for two years (of 5). Settlement figure was about 12k.... (Payments of £300 odd a month!)

 

Alliance and Leicester are much better (they rebate all bar two months of interest if you settle early)

Some places penalise you for ending the loan earlier. My girl friend got a loan from Lombard and one of the reasons she got it from there is there it no early pay off fee.

Unfortunately at the moment they (banks, financial institutions, sharks) are able to fleece you. Something to do with "rule of 78" for early settlement of finance. It's something the government are looking at changing to make a fairer settlement for the consumer. Don't know how long that will take them though.

 

Interest to be charged on the loan is front loaded and added to how much you borrowed, and then divided by the number of payments to be made, eg 48 months or 60 months to arrive at your monthly repayment. If you settle early their is a formula for calculating the refund of the front loaded interest, which results in you having a larger balance for anything up to 18 months after you started the loan.

 

There is a web site for calculating this, but I'm sure you've got better things to do.

 

I've got a headache now so I'm going to shut up!!

 

Simon:o :o :o