Can someone help me try and understand this loan statement, and reduce the amount I have to pay back.

[IllegallyBrunette]

Ok, long story short. I borrowed £6500 from Barclays bank in roughly 2003. Kept up with all repayments until about 2005, when I started to get behind. Had the loan restructured and all was fine until I split with xp in 2006.

I rang saying there was no way I could meet the monthly repyaments (roughly £150 a month) and so they let me pay £40 for a year, on the condition that after the year was up, I would pay £104 a month for the next 10 years.

I had to agree, I had no choice. They threatened to close my bank account and sell my debt on. As a single mum, I could of gone to court over it and paid a minimal amount each month, but I did borrow the money and felt I should at least show willing.

So, today I recieve a statement of my payments made from 24th Nov 07 - 13th Oct 08. All together I haver made one payment of £39.63 and then 10 payments of £104.76.

The balance on the 24th Nov was £6413.60, and the balance now, after the above payments is £6142.02.
So, I have paid in £1087.23, but my balance has only reduced by £271.58 due to the ridiculous amount of interest being charged.

Now, what I don't get is, if I for every £1087.23 I pay, only £271.58 is being applied to the loan after interest, how am I going to of paid off the £6500 in 10 years, or does the amount paid take into account the interest ???

Another thing I also want help with is, if I decide to pay the loan off early. In my contract it says that after 1/4 of the period of the loan repyament, so 2.5 years, if I wanted to pay it off, I would still have to pay them £5654.42. I have paid it for 1 year so far, so how can I work out how much I'd have to pay.
The total I pay back if the loan runs it's course is £12571.20.

I did ring Barclays and ask them that, but they guy I spoke to said, I needed to go into my brance and ask them, but as far as he knew, I only paid the balance on my stament and a months interest, which isn't nothing like what it says in my contract.
The reason I am asking is because my mum said she'd be willing to get a loan out to cover to pay this one off, and then i'd pay her. The new loan would only be over 5 years, but the possibility of this depends largely on how much Barclays want as a settlement figure.

Bump

Oh God Nutty, I don't know...but bump in case someone sees this.

It is very confusing isn't it.

I have been paying it off all this year thinking how well I was doing to make the repayments and then this statement really pissed me off.

not absolutely sure, nutty, but it may be that you've been paying off the interest so far, and not the capital, so once all the interest has been paid, the capital will start to decrease.

typically with a loan, the interest is whacked on at the point of the loan being taken out. So if you borrow 6500 you owe automatically 6500 plus all the interest.
If you pay off early, you do not have to pay the interest, as that interest is for months you wont owe them the money.
You have a right to be given an settlement figure, go into your local bank and they will be able to tell you.
I'm not clever enough to work out the actual amount (and I work in accounts ) DH might but he's still at work, but I can ask if nobody has answered when I have posted.

It's probably a structured loan where the payments at the beginning consist of a lot of interest and a little capital repayment. Towards the end of the term your payment is paying off less interest and more capital. Sorry, I'm not explaining very well.

I'd just ask Barclays for a settlement figure because it's very difficult to work it out yourself.

it must say on your statement how much is outstanding?
that is how much you need to pay back right now, I would presume. if not that's a bit odd.

I would call them again and if they can't answer your question then ask to be put through to someone who can.
tell them that you wish to pay the entire amount off and that you want to be sent a final statement. they will be able to do this.

I think you're doing the right thing by your mum geting a loan out, but make sure she gets one with a lower interest rate, the one you have atm sounds extortionate!

I'm only basis my post based on my husbands dealings with HSBC, he had a loan and repaid the figure he thought, and was then refunded the interest portion of the loan btw, not sure if barclays is different, but that is my experience anyway.

Ohh roght, still not sure I understand, but I do know what you mean.

I just don't quite get how it will all be paid back after 10 years, although thats not really my problem as I have a contract stating what I should pay and when, and for how long.

I would so love to pay it off earlier but if I have to pay back the loan amount plus a lod of interest then I won't be able to do it as the repayments for over 5 years would be too high.

If you want to pay off the loan early, you need to ask them to calculate the amount you have to pay on a certain date. `they will remove some of the interest you have already paid and put it towrads the capital, so reduce the settlement amount.

And one final thing, if you can, go into the bank rather than phone, ime they're usually a lot quicker to get you the figures face to face than on the phone.

Maybe the guy on the phone was right then.

If he is, then I could afford the repayments for that amount over 5 years , with someone else I mean.

I think what they've done is calculated how much interest you would pay over 10 years and applied it at the beginning of the repayment period, so it should all be paid now. All further payments should go into the capital reduction. Oh, and they will have added any charges at the beginning of the payment period as well.

Oh don't worry elf, I would go in, as everything always goes wrong when I ring them.

Thanks for all the help. Will let you all know what the bank say.

I think I understand what you mean now. Thats why the balance of the loan has only reduced slightly.

I always find it easier face to face, which I learnt when I was 17 and HSBC did something royally wrong with my account, all the guys on the phone would not help and were insisting they were right to deduct the 60 from my acc, but I went into the branch with my mum the following day, let my bottom lip quiver and all was well in the world again, they refunded all the charges and wrote an apology!

Having done some quick calcs based on the info you have given above (I am an accountant by the way) it looks like the figures are about right and you should have paid the loan off in about 10 years. The interest rate seems to be about 12.7% which sounds about right, you will find that every year the amount which you pay off the balance will increase and the interest will decrease, eg next year if you keep up to date with your payments and the interest rate stays the same you should reduce the amount you owe by about £450.

Hope this helps you put your mind at rest, if you can keep up payments then it will be paid off in the timescale the bank have given you.

Thanks annie.

The interest rate on the loan is 15.9

Done some more calcs on repayment after 2.5 years and it looks like they would want to charge a repayment fee or penalty which might be around £250 for early repayment as the balance after this time would be in the region of 5,400. You need to check the terms of your contract to see if this is correct.

It would only be worth your mum taking out a loan if the interest rate she can get is lower than the one you have at the moment.

Oh yes, she should be able to get a loan at a much better rate than me. Around 7.9% hopefully, which would mean slightly higher repayments of about £128 a month but it would be paid off within 5 years.

Oh ok then if the interest rate is higher thani thought then you may have no penalty to pay for an early repayment in which case if you can afford to pay higher repayments now then it may be worth refinancing over 5 years

Thanks, that was all very helpful.

I will definatly go into my branch next week for a settlement quote.

Sorry x post - definitly worth a refinance then.