50% of my payments go on interest

J

johndoey

Guest
Hi, i got a loan years ago and got in difficulty and couldnt pay it. I came to an agreement with their solicitors that id pay €35 a week, this was in April 06 when the loan was €14,241 after they charged me €700 for judgment costs. It was basically a loan that i kept topping up time after time without any problems but then i couldnt keep up the payments of around €90 a week due to my circumstances at that time. Since then i kept up the payments and they never pushed me to pay any more but unfortunately im worse off now and cant even pay the €35 so i sent them details of all my incomings and outgoings and explained i could only pay €10 per week until i get into a better situation but id like the interest stopped. They agreed to the €10 per week but said no to stopping the interest.

From April 06 to Now October 09 i paid €35 a week totalling €6,510.00 and then they took €2,931 in interest so basically half my payments were going on interest even at €35 per week. Now with €10 per week i doubt ill even cover the interest so my loan will increase each week. Theres now €10,733 remaining on the loan and it says the interest is 8% per annum simple interest.

Its confusing me though, are they charging me 8% of the original €14k back in April 06 as it seems like that from rough calculations

Is there anything i can do, i rang mabs but there up to their eyes and it will be a while before they can fit me in. Im tempted to just not pay, why should i pay them when my loan will just be getting bigger and bigger and bigger. I know its my fault but im just looking for a short term solution until im in a better situation, i havent missed a payment since Apr 06 so i think on my part i was being fair, i didnt ask them to stop it indefinetely just until my situation changes?
 
Why should you pay?Because you owe the money and your lender has been more than fair to you.If €10 a week keeps them off your back until your situation improves then so what if the outstanding amount rises slightly.If you default on the loan the consequences would be far worse than you owing an extra €300 in years time.
 
vandriver said:
If you default on the loan the consequences would be far worse than you owing an extra €300 in years time.
Click to expand...

This is not necessarily true. If the OP has not got the means nor the assets to repay the originator of the loan they may write it off as a bad debt.

OP can you do the money makeover section so that we can see if you can make any spending adjustments to see if you can pay off the loan. In relation to the interest have you been negotiating with the solicitors or the institution that loaned you the money?
 
Just on your confusion about the interest owing. As they have stipulated simple interest they are charging interest based on the original amount owed. Basically simple interest is calculated on the original sum borrowed (the principal) and not on the reducing sum.

The formula is I = (P * T * R)/100
where
I is the Interest
P is the Principal
T is the number of periods (in this case years)
R is the rate applied for a period

so for you that is
I = (14,241 * <number of years> * 8)/100

Have a read through these links, they may help explain:

http://www.getobjects.com/Components/Finance/TVM/iy.html
http://en.wikipedia.org/wiki/Simple_interest#Simple_interest
 
The reason i mentioned not paying is that i hadnt missed a payment in the last 3.5 years and in that time 50% of my payments i made were taken on interest, now that i have to downscale my payment 100% will go on interest and ill also add about €40-50 a month on top of that which will increase the interest again over time.

Its not as if they wont get their money i just felt expecting me to pay just the interest and the loan would get bigger seems a bit ridiculous. The advice im seeking is in this scenario when the agreed to the €10 payment and obviously accept that i cant pay any more is it unrealistic to expect them to stop the interest for a while until i can get back to paying €35 or more.

Ive emailed the banks solicters telling them i can only pay €10 a week and i wanted to stop the interest until im in a better financial position but they refused this. So do i email again saying i will stop paying if they dont cut the interest, if they still dont the reason i said id stop paying because at that stage i could let it go to court, then would the judge make me still pay the interest since he knows €10 is the most i can manage.

Im not sure what you mean about the makeover but my circumstances are briefly like this:

Per Week on average:
Income: €220 carers allowance (this allows me to work 15 hours but im still looking for something part time)

Outgoings:
Rent €70
petrol: €15
Insurance: €10
Tv: €5
Internet: €5
Food: €60
Loan: €10

Approx €175 leaving me €45 for myself for the week. I could sell the car but im looking after someone so i need it for doing shopping and bringing them to and from town etc i would be lucky to get €600 for the car if i sold it so i dont think selling that would solve anything.

So when you consider things like christmas, birthdays, tax, and having a social life then i dont see where i can spare anything. Now if i can pick up a part time job then ill be much better off but due to the carers situation im not really in a position to work full time for the time being.

So is it likely they will stop the interest and if not if i let it go to court is the outcome likely to be worse better, you say the worst thing is not paying, why i ask, what will happen, im not covering the interest anyway so if i dont pay the €10 and save it instead then how am i worse off. I owe €10 more but ive saved €10 (less interest)

I was kinda being sarcastic in the last paragraph as im not looking to avoid paying it just pointing out i dont see where its of much benefit if the interest is more than i could pay. Anyway thanks for the people who took the time to reply, much appreciated
 
Does it have to be recorded mail. I already sent them an email stating my outgoings/income and that i would like the interest frozen, they accepted the reduced payment offer to €10 but refused to freeze the interest. Do you think i should just follow up again and email about the interest or send it registered mail?
 
No, email is fine, i hadn't got an email address so had no option to send it by normal mail, I made sure it was recorded delivery so i knew they got it. Don't forget to keep copies of all your correspondence with them including the emails you've sent.
 
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