a dreaded welcome finance question

[LordLee]

erm... i am desperately in need of extra cash. and was about to take out a loan for maybe £2000. the settlement figure, after a 1/4 is something like £1795 and repayments would be £105 a month for 3 years. Now... i can afford this.

 

are they ok to deal with if repayments are kept up to date? or should i still steer clear?

[andabar79]

stay clear mate

[andabar79]

what percentage interest rate did they give you?

[LordLee]

60%. but i was gonna sort my credit score out (tis all to do with electoral role) and get a better loan and pay off welcome's. yes it will lose money. but am in need of some financial help at this point in time.

 

however... i am now not sure

[LordLee]

after (stupidly) getting a small load from welcome finance last year for £750 over a period of 24 months i have been paying on time every month.

 

i have just received my annual statement from them.

 

it show my recent monthly credits to my account... but, rather confusingly, also debits. these debits are around 50% of my monthly installments and are called 'CAPITALISATION' payments.

 

on the back of the letter it states "Where CAPITALISATION' is shown once, it is the application of the monthly interest to the account. Before 1st March 2008 this appeared on the statement with the description 'INTEREST'.

 

this just seems fishy to me. Especially after noticing that even though i was told the loan was for a period of 24 months... the letter now states 'Minimum Duration of 24 Months'.

 

I have not done the math yet... but at this rate i'll never pay it off.

 

I have attached the letter below.

 

Any ideas anyone? I knew this company would be stupidly high APR but are they being unlawful?

 

Please help...

[postggj]

afraid linkdoes not work

 

your problem could be the insurance added, ie, ppi

can you confirm any insurance on the agreement

[LordLee]

think the attachment is pending approval at the moment. i refused all PPI when taking out the loan.

[postggj]

do you still have a copy of the agreement

[ReasonableRon]

Welcome's personal loan agreements are monthly charge, which means that interest is added monthly instead of as a lump sum at the beginning. In order for them to be able to do this the interst rate must be variable, because if it was fixed then the total interest charge would be a known sum and therefore would need to be added at the beginning.

 

Providing you are paying the monthly installments on time then you should see the monthly interest charge getting smaller each month, which means that more and more each month is going towards paying off the capital balance. On this basis, the loan should be cleared within the anticipated terms.

 

If you have missed or been late with your payments then the picture changes because each month's interest after the missed payment is based on a balance higher than it would have been had the payment not been missed. This compunds the problem and would cause the term to overrun, hence the reaosn why the agreement states 'Minimum duration of....'

 

Hope that helps.