How much interest should I be expecting to pay to clear my debt ?

[Robds24]

I am 2 years into a 6 year plan. I have paid off £6000 out of the starting total of £21,000. Meaning I should have about £15,000. I will be receiving a large amount of inheritance in about 6 months and I hope to clear my debt. How much interest should I be expecting to pay on top of the remaining £15,000?should I be expecting

[Foggy]

You will be expected to cover the full original debt, not just the agreed payments, fees and possibly statutory interest at 8% simple, calculated on the reducing balance.

[kallis3]

Agree with Foggy on this one.

[Michael Peoples]

Some firms exclude statutory interest in their proposals so your debt may be lower than you think. Alternatively creditors may agree to forego the interest as they are getting 100p in the £ anyway.

[longslog101]

worst case scenario if charged interest use http://www.thecalculatorsite.com/financ ... ulator.php

and click standard calculator and put in your total debt to start with and term 6 years and it gives you a summary, I put your21k in and 6 years and it returned this:

Year, Year Interest, Total Interest, Balance

1 £1,742.99 £1,742.99 £22,742.99
2 £1,887.66 £3,630.65 £24,630.65
3 £2,044.33 £5,674.98 £26,674.98
4 £2,214.01 £7,888.99 £28,888.99
5 £2,397.77 £10,286.76 £31,286.76
6 £2,596.79 £12,883.55 £33,883.55

the final figure is what the balance would be at the end of that year, so after 2 years 24,630 plus any fees, less any payments made.

though you may have signed up to a good firm that does as Michael said above, this is prob worst case scenario.

[Lisa Thomas]

Hi - I have assumed payment would be made after about 3 years and by my maths the total debt plus interest and 15% costs would be £30k. Less the £6k payments = £24k balance. This is on assumption interest is applicable, creditor claims have not changed from £21k, Supervisors costs are fixed at 15% and no dividends have been made yet.

[lifenoteasy]

Double check what supervisor costs are - 15% is standard but we have seen identified costs of 30% for some firms.

[Foggy]

I believe that the interest is simple, not compound, and calculated on the reducing balance, so will be less than the figures quoted by the calculator used above.

[Robds24]

Thanks everyone. I am with PayPlan, and my total original debt was £18k, I assumed £21k was because of fees. I am just worried because when I asked them last week if I was right to assume I would just have to pay the remaining £15k with my inheritance to be free, they warned me I would have to pay a lot of interest on top.

I have requested a settlement quote out of curiosity. But they did explain this would expire by the time I am ready to pay in 6 months, and that I would then owe more because of interest.

[Lisa Thomas]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Foggy

I believe that the interest is simple, not compound, and calculated on the reducing balance, so will be less than the figures quoted by the calculator used above.

But if say no dividends have been paid to date Foggy surely there will be no reducing balance as the creditors debts will have been o/s since day one?

[jayse21]

ive been reading these posts and becoming more and more depressed. similarly to the first post, we are expecting a windfall which is probably about 25k more than what our original debt was - having paid in nearly 12,000, we were hoping to just send them the balance minus what we originally owed - if you then add on interest, by using your calculator link, we are unlikely to be free and clear as were were hoping - there must be some hope surely, as if we didn't have this, the most they would have received at the end of our 6 years would have been 17,000 in total. we don't find our iva that helpful and they are difficult to communicate with, which doesn't help. as we are getting on in years, we want to plan for our retirement, but with this hanging over us, we feel there is no end in sight!

[Foggy]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Lisa Thomas

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by Foggy

I believe that the interest is simple, not compound, and calculated on the reducing balance, so will be less than the figures quoted by the calculator used above.

But if say no dividends have been paid to date Foggy surely there will be no reducing balance as the creditors debts will have been o/s since day one?

An interesting point. To my simple mind, as the Supervisor has been holding the monies in escrow, on behalf of the creditors, I would argue that the balance should reduce with each monthly payment.

[Foggy]

font size="1" face="Verdana, Arial, Helvetica">quote:<hr height="1" noshade>Originally posted by jayse21

ive been reading these posts and becoming more and more depressed. similarly to the first post, we are expecting a windfall which is probably about 25k more than what our original debt was - having paid in nearly 12,000, we were hoping to just send them the balance minus what we originally owed - if you then add on interest, by using your calculator link, we are unlikely to be free and clear as were were hoping - there must be some hope surely, as if we didn't have this, the most they would have received at the end of our 6 years would have been 17,000 in total. we don't find our iva that helpful and they are difficult to communicate with, which doesn't help. as we are getting on in years, we want to plan for our retirement, but with this hanging over us, we feel there is no end in sight!

It depends upon the wording of your arrangement and upon who your IP is. Many arrangements have statutory interest excluded at the outset. In cases where it is not excluded there have been many instances where the IP has successfully petitioned the creditors to get this removed. However, some IP's will not even try !

[Michael Peoples]

IPs tend to get paid as a percentage of realisations therefore it could be in the IPs interest to add the statutory interest on. This raises more money and thus attracts a higher fee for the IP so you may need to add a further 15% onto the interest to cover the IPs fees.

We try and exclude statutory interest even though it costs us money and where it has been requested we try and get it removed. Not all firms work the same way though.

[jayse21]

its GT and the original T&Cs were with Tenon. the wording is very confusing - on one hand they state "for the avoidance of doubt, statutory interest will not be payable", but then in another paragraph, they state "repay creditors in full with any interest they are entitled to under the arrangement" Can't find anything which contradicts this in GTs amended terms when they took over