Fixed rate loan settlement figure

Cyrus

Looking for some quick advice,

i took out a 4 year fixed rate personal loan in 2009 for 21,000, interest charge was 2904, so monthly cost 498.

As of today the balance is 13,944 (20 payments of 498 paid off).

I want to clear the loan now and have the funds, settlement figure offered was 13,141, which seems a little penal to me? but maybe its about right, anyone got any feedback on this?

homer911

That works out at about a 6.5% nominal rate. On a equivalent variable rate loan the settlement figure would be just over 12,900, and you would have paid around 1,900 in interest, so it doesnt seem a huge leap to the settlement figure of 13,141

If it was me, I'd probably accept it

dobsdave

Cyrus wrote: »

Looking for some quick advice,

i took out a 4 year fixed rate personal loan in 2009 for 21,000, interest charge was 2904, so monthly cost 498.

As of today the balance is 13,944 (20 payments of 498 paid off).

I want to clear the loan now and have the funds, settlement figure offered was 13,141, which seems a little penal to me? but maybe its about right, anyone got any feedback on this?

So you owe currently 13944, and they will let you clear for 13141?
I would have thought they would look for the full 13944 as you signed up to a fixed rate loan tbh.

Cyrus

homer911 wrote: »

That works out at about a 6.5% nominal rate. On a equivalent variable rate loan the settlement figure would be just over 12,900, and you would have paid around 1,900 in interest, so it doesnt seem a huge leap to the settlement figure of 13,141

If it was me, I'd probably accept it

i guess so, but that said ill have paid 72% of the interest on just 42% of the term

dobsdave wrote: »

So you owe currently 13944, and they will let you clear for 13141?
I would have thought they would look for the full 13944 as you signed up to a fixed rate loan tbh.

i understand that there is a penalty for clearing a fixed rate loan early, but i dont think anywhere expects you to pay all of the interest when you havent had the money for all of the term???

Cookie_Monster

thats high enough IMO.

I have a three year motor loan I have been looking to clear if car sells and am being given a settlement figure of remaining balance- 1 year of interest.

remaining:17,820
settlement now: 16,900

chris85

Unfortunately thats the way fixed rates are and its fine to charge whatever penalty they wish as long as long as you signed for it. Most charge 6 months interest. Its the price you pay for a fixed rate.

seems normal enough to me.

Cyrus

chris85 wrote: »

Unfortunately thats the way fixed rates are and its fine to charge whatever penalty they wish as long as long as you signed for it. Most charge 6 months interest. Its the price you pay for a fixed rate.

seems normal enough to me.

im being a bit thick perhaps so humour me, but 6 months interest should only be 360, the amount of interest remaining is 1,694, of which they are excusing me 803, so im paying 891

or am i being thick

Cyrus

excuse me, i knew i was being thick

the loan interest is calculated using sum of the digits

in that context the settlement figure is fine