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Am I being really thick? RE: Loan

Former MemberFormer Member Posts: 1,876,323 The Mix Honorary Guru
in Home, Law & Money
OK I took out a loan of £2,300 on an 18 month term a few months back.

Repayments £149.05 a month = £2682.90 repayable, fine.

However, there's been an interest charge of, on average, £37 a month added onto the loan amount.

What happens after the 18 month period I agreed to when there's a surplus of (£37 X 18 months) £666?!

Worried can someone shed some light?

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    Former MemberFormer Member Posts: 1,876,323 The Mix Honorary Guru
    Did you take out payment protection insurance? Could be that. Check your loan documentation. If in doubt, give the bank a call and they can clarify exactly what the charge is for.

    Did you miss any payments during the lifetime of the loan?
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    Former MemberFormer Member Posts: 1,876,323 The Mix Honorary Guru
    Thunderstruck wrote: »
    Did you take out payment protection insurance? Could be that. Check your loan documentation. If in doubt, give the bank a call and they can clarify exactly what the charge is for.

    Did you miss any payments during the lifetime of the loan?

    Read through all the small print earlier, no insurance on the loan and haven't missed a payment. Here's an quote:

    Other financial information: Total charge (interest) £376.42 at 19.7% per annum

    So £2300 + £376.42 = £2676.42, correct.

    Yet no mention of any other charges? :confused:
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    Former MemberFormer Member Posts: 1,876,323 The Mix Honorary Guru
    Contact whoever you took the loan out with, a lot of people are mis-sold loan protection and by the sounds of it, it could possibly be on there even if it doesn't seem like it from the small print
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    Former MemberFormer Member Posts: 1,876,323 The Mix Honorary Guru
    I would expect the interest additions to go down as you pay more off, so it might all work out correctly.
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    Former MemberFormer Member Posts: 1,876,323 The Mix Honorary Guru
    Mist wrote: »
    I would expect the interest additions to go down as you pay more off, so it might all work out correctly.

    No, the interest payable is calculated on the initial sum borrowed, not on the remaining unrepaid capital. Otherwise interest rates would have to be a lot higher to compensate. Therefore, assuming it is a fixed-rate loan, the interest payments should be the same throughout the lifetime of the loan.

    OP - the only way you can find out is either do a Google search or better, call your bank and get them to explain it.
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