# CU Car Loan - amount outstanding at end of term



## c1aro (4 Jul 2014)

Hi
I am coming towards the end of a five year car loan with my local CU.  I rang this morning to see how much was left on the loan (as I had taken an option to do reduced payments for four months last year Oct, Nov, Dec, Jan - I repaid the arrears at the end of January of this year and just wanted to be sure that there were no arrears outstanding).  There are no arrears outstanding.  
The monthly payments are €203 pm on a €10,000 loan over 5 years.  Per the schedule the total repayable was to be €12156 which was 8%.  When I look at the schedule where it says Variable/Fixed there are some XXXXXXX but they are on the line above so can't really tell whether it was variable or fixed and honestly can't remember.  The first payment was on 2nd March 2010 which would mean that there have been 52 payments between March 2010 and June 2014.  I was told that there was a balance outstanding today of €2327.  There are 8 monthly payments left between now and Feb 2015 (which is the end of the five year contract) and these would amount to €1624 which will leave a shortfall of €703 as per today.  When I mentioned this difference to the lady in the CU she seemed surprised also and all she could say to me was maybe it was a variable interest rate.  I said that I had never had a car loan before where there was an amount outstanding at the end of the term (thinking on it now they may have been shorter terms ie 3 yrs).  She is going to investigate.  She did suggest to me that I could clear it today by using my savings - which I declined at the moment.  Does it stand to reason then that the amount outstanding at the end may even be greater than €703 depending on interest rates?

OK - I may have signed up to a variable rate loan (in which case I am at fault for not noting this), but if this is the case should I have had some form of communication from the CU that my payments were not going to clear the loan in the agreed timeframe. 

I would be grateful for any thoughts on this - I feel foolish now as I normally have quite an ok handle on any agreements I enter into (ie I know my mortgage is variable but repayments go up and down and there is notification of same).  Am I doing my calculations correctly?

Thank You


----------



## Gerry Canning (4 Jul 2014)

ciaro; As you state k10 over 60 months is 203 per month.
So 8 months@ 203 = 1624.
Could it be that on the 4 months you (missed/reduced ) that the amount underpaid or(missed/reduced) from agreed term comes to about e700.
In other words the reduced payments from 203 in Oct,Nov,Dec,Jan amount to circa e700?.
You would have that new lower payment AGREED hence not arrears but you still would be left with shortfall from 203 per mth + a bit extra interest.
I wouldn,t see interest change making big difference .
I normally find Cu,s very trustworthy and they do not screw people on extra charges, so probably a simple explanation .


----------



## c1aro (4 Jul 2014)

Hi Gerry 

That was my initial thought.  Just to fill you in:

Oct/Nov/Dec I paid €50 pm instead of the €203.  Despite having prior agreement from the CU to do the reduced payments for four months I received a letter from them on 8th January that I was in arrears to the tune of €440.20.  I went to the CU on 10 Jan and paid them €450 to clear(which put me under a bit of pressure but hey ho I did it).  The January payment would have gone in I presume after the 8th at €50 also (which was not outlined in their letter).  The payment for Feb would have resumed again at €203.
When I rang about arrears today I was thinking specifically of the difference between the payment of €50 and €203 for January = €153.  However, I am told today that there are no arrears and given the o/s amount mentioned in opening post.  Even if I take this underpayment into account there is still a difference of approx €547 (€703-€153).  Do you think variations in interest would account for this over a five year period.  I know its difficult for you to make a judgement on this, but I have not heard back from the CU today and I would like to know if I have grounds to argue with the CU or not, or if this makes perfect accounting/financial sense.  Did I screw up by reducing the payments for the four months - even though I paid back most of the underpayment?  Thanks again for your time.


----------



## vandriver (4 Jul 2014)

Have any of the payments(especially the 450) been incorrectly credited to your savings?


----------



## c1aro (4 Jul 2014)

Hi Vandriver
No checked that.  The amount of savings is static.  Unfortunately has not changed even 1 cent since beginning of loan in 2010.  No dividends in years either.


----------



## Brendan Burgess (4 Jul 2014)

Hi ciaro 

The arrears figure is not relevant to any calculation.  

You should ask the CU for a statement of the account from the start up to today. 

Look at the way they charged interest.  Did they calculate it correctly? What rate did they charge? If you started off borrowing at 6% and they put the rate up to 12% without telling you, then you have grounds for complaint. 

As far as I know, they charge interest every month on the balance outstanding. If you take a 3 month break, the balance will be higher and so the interest will be higher. 

I suspect that they agreed a reduced payment and you made the reduced payment. Therefore you owe this amount and the interest on it. 

The arrears figure is a notional figure and does not affect any calculation of interest. 

Brendan


----------



## c1aro (4 Jul 2014)

I shall have to wait until Monday as they are closed for the weekend now.  I will ask:

1 For the different interest rates over the five years
2 If the underpayments for the four months made a material difference in the amount of interest I am paying (even though the majority of this was paid back)

I will come back when the information has been provided and I may need some further assistance in understanding it.  Thank you all for your advice.


----------



## Brendan Burgess (4 Jul 2014)

The staff will not be able to give you a definitive answer to that question.

Just ask for a statement and check it. 

Brendan


----------



## c1aro (14 Jul 2014)

Dear Brendan
You have had a lot on your plate over the past week - thank you for taking the time to look at my small problem.

I have received a statement from the CU, but it doesn't mention any rate other than the rate at the date of printing which was 11.9%.  With this statement they sent a photocopy of rates which reads as follows:
Personal Loan 11.9%
Car Loan 7.9%
Education Loan 7.9%
Secured Loan 5%
Christmas Loan 7%
Of course I made a call to them and asked why my interest rate was 11.9% when it was a car loan I took out at 8% in 2010.  Why wasn't the rate at 7.9%.  The lady I spoke to told me that 11.9% was correct as my loan was tied into a "different account" and that was the rate of interest on that account.  So I said, conceivably if 5 different people took out different loans over the last five years they would all be on a different rate and I was told yes.  I just automatically assumed that whatever was the current rate would be applied to any variable interest rate car loan.  Is this correct?  I got nowhere with the clerk I spoke to so I am making an appointment to see the Manager in the next day or so (just waiting for them to come back to me).  What should I be asking them when I go in - or is this normal practice and I just have to deal with it.  Thanking you all for your time.


----------



## Gerry Canning (14 Jul 2014)

C1aro; 

On the k10 @ 10.9% your payments would be 217 per month ie 14 more than you believed them to (stay) @ 8%. 
Over 60 months that makes 60@14 = 840 more.
Rate was variable and looks like it crept up from 8 to 10.9 . That means your monthly payment should have increased as rates increased.
You never thought of this and obviously the CU did not pick this up.

I think it is a case of some lesser payments and interest increase that has caught you.
You are correct to think {current rate would be applied to any variable rate car loan} 
What that (sadly) means is that IF VARIABLE rate goes up , so do does your repayment/or the term lengthens.


----------



## Slim (14 Jul 2014)

Hi C1aro,

When you received the loan, you should have signed a document stating what your interest rate would be or type of account on which it was based. If the rate changed over the term you should have received a letter each time informing you of the new rate and payment.


----------



## c1aro (14 Jul 2014)

thanks for the recent comments.
I understand now that my car loan was variable interest rate.  I honestly don't remember that discussion at the time, other than looking at the total amount repayable over 60 months.  My mistake.
However, when I go to the CU (appt is tomorrow at 3:15) am I reasonable in asking why the current Car Loan rate as advertised by the CU isn't the rate that is currently on my account (ie 7.9% advertised and 11.9% on my loan).  I would have thought that no matter when I took out the loan that the current variable rate should be applied to it.  Also, am I reasonable in asking why I did not receive a notification of changing rates.  Surely, this works to the advantage of the CU - in that if I am not increasing my repayments to stay in line with fluctuating rates that I have a bigger ongoing balance on which interest is due.  Also, I do believe that their car loans should only be for 60 months and that they should not go over this time period.  
I am aware that variable means if the interest rate goes up that I owe more, sadly I have had a variable interest mortgage, but every time there is a rate change I get notification and my repayment changes.  I am just a bit mad a the CU for not addressing this and giving me the opportunity the increase my repayments.   By their logic,because they say my car loan is in a "different account" to new car loans, they could charge 15%, 20% or any figure they pluck out of thin air.  I just can't see the logic in it.  Any tips for the discussion tomorrow would be welcome.  Thanks Again


----------



## c1aro (16 Jul 2014)

Just to update:
I met with CU yesterday evening.
The “different account” was explained as follows:  
When I took out the loan in February 2010 ‘Personal Loans’ were the only type of loan available at 8%.
April 2010 increased to 9%
April 2011 increased to 9.9%
July 2011 increased to 10.9%
Oct 2011 increased to 11.9% to date
In March 2010 they introduced a new rate of 7.9% for Car Loans.
I missed out availing of this by a little over one month (my loan application was 02.02.10 and first payment was 23.02.10).  So my loan was never classified as a car loan even though the cheque was made out to a garage.

The manager has agreed to put the outstanding balance remaining €2327.39 into a new loan “Secured Loan” at 5%, as I have savings to cover.  However, continuing at my current monthly repayment of €203 it will take 11 more months to clear this balance plus whatever interest accrues (original loan was to wrap up in January 2015).

The manager asked that I send in a letter outlining my issues with the loan to the board and they would review.  Ideally what I would like is for the loan to have been at 7.9% or even the 8% on the contract.  Would I be unreasonable in requesting this?   I should have been way more proactive with this, especially as it was pointed out to me that while I did not receive correspondence each time the loan changed, the rates were in a booklet produced for the CU year end and received by each member.  Admittedly, I opened the envelope, but to me it just appeared to be the audited accounts and I never read it – my own fault……….

Thanks


----------



## Gerry Canning (16 Jul 2014)

You were unlucky to miss the new 7.9% rate (thats life!)
It looks like you have been caught by increasing rates and since it was variable again(thats life!)

To put the 2327 into secured loan , charge you 5% whilst you have savings to cover , seems far too harsh. Why not just use your savings and be done with it.

Since Mgr has said put to Board; I would do that ask for 8% as you thought and see what they come back with.
If they come back with a half decent offer , suggest you take it.

In relation to rate changes it would not make sense for C U to write every time there would be rate changes. Very costly and probably in general not useful.  

{my own fault} = no , how many of us actually read these things?


----------



## c1aro (4 Sep 2014)

Hi Gerry
Just an update on the situation.  We have had our appeal go the Board, but unfortunately they say they are unable to recalculate the interest on the borrowings.  So all I can take from it is to be more aware of "ALL" correspondence that comes from the CU including the Annual Report.  Thanks everyone for your input.


----------

