On a DMP - but loan has "front-loaded interest"...

[DarrenAs]

Hi - I hope someone can help: thanks in advance.

 

I'm a year into a DMP now, but am having trouble with one of my creditors.

 

All the others froze interest when the DMP started,

apart from my biggest creditor, who gave me a personal loan in 2009.

 

The creditor says that because all the interest was "front-loaded"

- charged and added on to the balance right at the start

- they cannot do anything to help my situation.

 

So my annual statement from them shows me making a reduced DMP payment each month,

while the effective interest rate for each month remains almost double that.

 

I wondered if anyone else has experience of this?

 

I asked the creditor to look at cancelling/refunding the interest covering the time period since my DMP began

- in other words, I asked for the same help that my other creditors have offered.

But they just said no.

 

All the interest was added to the total in month one of the 86 month loan, a

nd that's the way it stays...

Is that right?

 

Thanks very much for any advice!

[citizenB]

Was there any Payment Protection Insurance on this loan ?

[DarrenAs]

Hi - no, unfortunately not! Thanks

[citizenB]

Ah, that is indeed a shame.. I will send out some S.O.S for you regarding the top loaded interest.

[DarrenAs]

thanks, that's very kind!

[dx100uk]

who was the creditor

 

they cant lump int on at the start

 

AND

then charge it monthly too!!

 

sounds like GE money to me

or

black horse.

 

dx

[dx100uk]

oh and scan the agreement up please

 

set your default scan page size to A4 less than 300DPI [150 will do]

scan the required letters/agreements/sheets - as a picture[jpg] file

don't forget you can use a mobile phone or a digital camera too!!

'

BUT......

ENSURE: remove all pers info inc. barcodes etc

but leave all monetary figures and dates.

.

*********************************************************

{DO NOT USE A BIRO OR PEN OR USE SEE THRU TAPE OR LABELS]

*************************************************************

.

DO IT IN MSPAINT.EXE or any photo editing program

goto one of the many free online pdf converter websites ...

http://freejpgtopdf.com/

..

if you have multiple scans/pics

put them in a word doc FIRST and convert that to PDF

or http://www.freepdfconvert.com/

or

use www.pdfmerge.com

 

convert existing PC files to PDF [office has an installable print to PDF option]

..

 

it would be better to upload a multipage pdf if

you have many images too rather than many single pdfs

.

or if you have PDF as an installed printer drive use that

or use word and save as pdf

try and logically name your file so people know what it is.

though dont use full bank names or CAG in the title

i'e Default notice dd-mm-yyyy TSB

.

open a new msg box here

hit go advanced below the msg box

hit manage attachments below that box

hit the add files button on the top right

hit select files, navigate to your file on your pc

hit upload files

.

dx

[DarrenAs]

who was the creditor

they cant lump int on at the start

AND

then charge it monthly too!!

 

Hi - thanks very much for the reply.

 

To clarify, that is not what is happening here

- I'm not being charged twice.

 

It's Halifax - the way the loan was set up,

all the the interest was front-loaded right at the start.

The annual statements I receive just show, month by month, the amount I have paid and, in brackets,

the amount of front-loaded interest that effectively applies to that month of the agreement.

 

So I'm not being double-charged or anything

- their statements just break it down so you can see how the original interest was calculated.

 

All I asked them to do is to look at deducting/refunding the interest for the months since I entered a DMP, and that request was turned down.

They say that because all the interest was added to the total balance on day one, there is nothing to 'freeze'. And they won't do refunds.

 

I know that is their right, but it seems unfair on all my other creditors who have helped by stopping interest charges.

And it means my repayments to Halifax will drag on for years...

Does anyone know what more I can do, or is what Halifax are saying just standard practice, and I have to accept it?

 

(And I don't have the original agreement to hand, unfortunately, but I will ask for a copy.)

 

thanks again for taking the time to help!

[Peterbard]

Hi - I hope someone can help: thanks in advance.

 

I'm a year into a DMP now, but am having trouble with one of my creditors.

 

All the others froze interest when the DMP started,

apart from my biggest creditor, who gave me a personal loan in 2009.

 

The creditor says that because all the interest was "front-loaded"

- charged and added on to the balance right at the start

- they cannot do anything to help my situation.

 

So my annual statement from them shows me making a reduced DMP payment each month,

while the effective interest rate for each month remains almost double that.

 

I wondered if anyone else has experience of this?

 

I asked the creditor to look at cancelling/refunding the interest covering the time period since my DMP began

- in other words, I asked for the same help that my other creditors have offered.

But they just said no.

 

All the interest was added to the total in month one of the 86 month loan, a

nd that's the way it stays...

Is that right?

 

Thanks very much for any advice!

 

Who manages the DMP or is it one you set up yourself ?

 

Unfortunately many fixed sum loans calculate the interest monthly based on the remaining balance, this means that the early payment are just interest with only pennies being paid off the balance. If the earlier payments are short even by a couple of pounds this can mean that the balance"rolls up", that is it increase month by month because the repayments are not covering the interest being charged.

 

Creditors will not reduce repayments because of this, usually it takes the agreement to be defaulted and then a new arrangement being made to repay the default sum.

 

How many months has the arrangement been running ?

[DarrenAs]

Who manages the DMP or is it one you set up yourself ?

How many months has the arrangement been running ?

 

Thanks. I manage the DMP myself, and it's been going 15 months now.

 

The loan, though, dates back to 2009, and all the payments were up to date for the first two and a half years.

 

The payments are as you describe: mostly interest at first.

 

They have already defaulted me, but the annual statements are unchanged in format.

 

They agreed not to charge additional interest for making reduced payments, which I appreciate

- but that doesn't change the fact that, because they won't refund the interest which applies to the months since I entered the DMP,

Halifax are set to be the only one of my creditors who receive back everything I borrowed plus every bit of interest in the original agreement (eventually....)

 

I just wanted to know if this is standard? It doesn't seem right to me? thanks

[dx100uk]

that's better

 

as far as I know

there are no loan companies that do that

 

they'll do it on credit cards but not loans

 

dx

[fletch70]

I had a loan with LV that front loaded the interest. When they defaulted me they offered a rebate if I settled early as per the T&C's but I couldn't. I am told it is perfectly legit.

 

It's kinda the same principle as many payday loans (boo hiss) where they charge you £30 per hundred borrowed and it doesn't matter if it's for 5 days or 31 days

[DarrenAs]

OK, thanks very much for the reply. Looks like there is no way round this, then. I'll be paying this back for many years to come!

[sequenci]

Are they still applying interest going forward? If so please ask them to consider freezing it.

[Peterbard]

It sounds to me like they have taken the full contractual interest due on the contract added it to the principle and then accepted a reduced repayment for an extended term on the total.

 

IN my experience DMPs usually base their pro rata payment calculations on the early settlement figure for fixed sum loans, that is just the balance of the principle outstanding.

 

If the OP is happy with the repayment being made, I dare say he will have plenty of time to argue about the fairness of this extra charge, especially as other creditors have agreed to waive interest and in view of OFT guidelines.

[dx100uk]

p'haps time to start a thread on this loan

- dump us the paperwork and let us look see?

 

dx

[DarrenAs]

It sounds to me like they have taken the full contractual interest due on the contract added it to the principle and then accepted a reduced repayment for an extended term on the total.

 

Hi, thanks - yes, that's right - that's exactly what they've done. (Though I should make it clear that they've not done it in response to the DMP:

the loan was always set up like this, from the outset.

 

I borrowed X,

the total interest over the term was Y,

and my balance to repay on day one was X plus Y.

My early repayments were almost entirely interest only payments.

In short, all the interest was 'front loaded'.

 

They have given me some help since the DMP in that

a) they have accepted an extended repayment term with reduced payments, and

b) they have promised not to add any additional interest.

 

But because the whole contractual payment was added to the principal at the outset,

that means that, however many years it takes me,

they stand to get back every bit of interest due under the original contract,

unlike all my other creditors. And they won't budge on that.

 

I'm very happy to keep arguing with them about this being unfair,

but I really just wondered if anyone else had experienced this situation,

or can tell me whether I'm right/wrong to persue it.

 

(And dx100uk, thanks - I will have to ask them for a copy of the original contract, but when I get one I'll post it.)

[Peterbard]

\it doesnt really matter how the agreement is configured anyway. Section 95 of the act says that a prescribed rebate of interest must be made on an early demand for payment. The formula is in the early settlement regs.