Elderbridge loan payment increase

[pau1200]

Hi,

I'm after some advice, we took out a Barclays secured loan 11 1/2 years ago and it was transferred to elderbridge last year. The last payment will be may 2017 and we have never missed a payment. I received a letter today saying the interest rate is dropping so the amount of interest being applied to my load will be decreasing. Great I though but then it goes on and says because of this my payments are increasing, how is this possible as they should be decreasing. Can someone advice if this is right as it doesn't seems right to me.

Thanks

[Fred]

Re: Elderbridge loan payment increase

My guess would be that you are paying the loan off on a monthly interest basis rather than your APR which, on your contract should be higher than the monthly interest rate quoted.

It is not unusual for these loans to be set up like that. It means that additional costs/charges are not added to the payments but, still need to be covered during the term.

Is you loan over £25K ?

[meellis]

Re: Elderbridge loan payment increase

Depending on the loan the APR is always different to the monthly interest charged. The Apr isn't used to calculate it is there for cost comparison of a product over a year taking into account a number of factors. I would imagine they want to increase the payments because they don't feel the loan will be paid off within term either because it was miscalculated or there have been costs added. I would suggest you find out what the balance is and why they see an increase is necessary.

[Peter_Rad]

Interest is charged on the principal balance, which is highest at the start of repayment. Reducing the monthly payment by increasing the repayment term or duration of the loan will slow progress in paying down the principal balance.