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floors4u
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Just wondered if anyone can tell me , is it usual for a bank not to offer a reduced settlement fee on a personal loan when payed back early ? 

My wife had approx £7700 left to repay over approximately 3 years . I was certain her settlement would be a decent amount less than this figure due to the interest owing . 

But no , not only did they not offer a reduced settlement , but they also charged an extra £260 for loss of interest payed !! The mind boggles.

Edited by floors4u
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Just now, floors4u said:

Just wondered if anyone can tell me , is it usual for a bank not to offer a reduced settleny fee on a personal loan when payed back early ? 

My wife had approx £7700 left to repay over approximately 3 years . I was certain her settlement would be a decent amount less than this figure due to the interest owing . 

But no , not only did they not offer a reduced settlement , but they also charged an extra £260 for loss of interest payed !! The mind boggles.

pretty sure that would have been explained to you when you took the loan out

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15 minutes ago, Peter Layman said:

pretty sure that would have been explained to you when you took the loan out

I didn't take it out . 

Do you have any further comment as to whether this is normal practice?

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6 minutes ago, The Phantom said:

I've done similar and repaid loans early with IOM Bank over the years.

I haven't had to repay the whole shebang including interest to term, but have had to pay a small 'penalty' interest amount on top of the amount outstanding at the date of repayment. 

The most recent paperwork I had quoted the following, although it probably varies bank to bank or upon the type of loan 

image.thumb.png.9b9b6404a58c2b01f76f39953c583f71.png

 

Edited by The Phantom
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1 hour ago, floors4u said:

Just wondered if anyone can tell me , is it usual for a bank not to offer a reduced settlement fee on a personal loan when payed back early ? 

My wife had approx £7700 left to repay over approximately 3 years . I was certain her settlement would be a decent amount less than this figure due to the interest owing . 

But no , not only did they not offer a reduced settlement , but they also charged an extra £260 for loss of interest payed !! The mind boggles.

I assume the £7700 was the full capital left outstanding not capital plus interest. Had the loan gone full term she would have paid £7700 or £214 per month plus a  decreasing amount of interest for 36 months. Instead she's paid £7700 plus 56 days interest (assuming same terms as the Phantom posted).  

So that's about 22% pa. If the loan ran to term extra interest would be added to it each month (slightly less each time because the capital is reducing), I calculate that as about £2600. Therefore had it run to term she would have paid £7700 plus £2600 instead she's paid £7700 plus £260. So she's better off repaying loan. 

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On 6/11/2021 at 12:00 PM, floors4u said:

Just wondered if anyone can tell me , is it usual for a bank not to offer a reduced settlement fee on a personal loan when payed back early ? 

My wife had approx £7700 left to repay over approximately 3 years . I was certain her settlement would be a decent amount less than this figure due to the interest owing . 

But no , not only did they not offer a reduced settlement , but they also charged an extra £260 for loss of interest payed !! The mind boggles.

It's perfectly common and exactly how it should be.

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My mortgage provider allows -some- overpayment, but too much, and they sting you with a fee (I guess to cover loss of interest)

Not only that, even after you've paid the entire balance off, there's a 'mortgage completion fee'. Yes this was explained, but being the Island, there wasn't a huge range of options.

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On 6/11/2021 at 12:00 PM, floors4u said:

Just wondered if anyone can tell me , is it usual for a bank not to offer a reduced settlement fee on a personal loan when payed back early ? 

My wife had approx £7700 left to repay over approximately 3 years . I was certain her settlement would be a decent amount less than this figure due to the interest owing . 

But no , not only did they not offer a reduced settlement , but they also charged an extra £260 for loss of interest payed !! The mind boggles.

It’s normally in the contract, early repayment charge/early settlement fee, sometimes you can make small overpayments or shorten the term so you pay it off quicker, you can always ask them to calculate what it would cost to repay early.

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On 6/11/2021 at 12:00 PM, floors4u said:

Just wondered if anyone can tell me , is it usual for a bank not to offer a reduced settlement fee on a personal loan when payed back early ? 

My wife had approx £7700 left to repay over approximately 3 years . I was certain her settlement would be a decent amount less than this figure due to the interest owing . 

But no , not only did they not offer a reduced settlement , but they also charged an extra £260 for loss of interest payed !! The mind boggles.

Completely normal.  They are a business after all.

Cost me 14k to settle 12k loan 12 months into the 36 month term years ago.

Didn’t do that again!

 

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10 minutes ago, doc.fixit said:

It may be, 'normal', but it is profiteering in my book. ( Note, I said profiteering not profiting!).

Is it though? The length of the loan is one factor that influences the interest rate on the loan. A bank would give a different rate for a 1 year loan than a 3 year loan. I note IOM bank don't even offer a 1 year loan. That would create the possibility that people could deliberately take out a 3 year loan at a lower rate knowing they intend to pay it off in one year. Banks aren't going to let that happen.

The practice of making early repayment charges isn't unfair in itself, maybe you could argue the amount charged is unfair. 

 

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22 minutes ago, Declan said:

Is it though? The length of the loan is one factor that influences the interest rate on the loan. A bank would give a different rate for a 1 year loan than a 3 year loan. I note IOM bank don't even offer a 1 year loan. That would create the possibility that people could deliberately take out a 3 year loan at a lower rate knowing they intend to pay it off in one year. Banks aren't going to let that happen.

The practice of making early repayment charges isn't unfair in itself, maybe you could argue the amount charged is unfair. 

 

Exactly.  Like taking a phone contract over 2 years, using the handset and service for a few month at a subsidised rate and expecting to be able to give it back with no penalty.

 

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