• Report: #364967
Complaint Review:

Household Finance Corporation

  • Submitted: Wed, August 20, 2008
  • Updated: Wed, August 20, 2008

  • Reported By:Hamburg New York
Household Finance Corporation
HFC.COM Nationwide U.S.A.

Household Finance Corporation Deferred Interest Even when payment is made early a can't win situation Nationwide

*Consumer Suggestion: Here's a different explanation.

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I have a 'simple interest' second mortgage from HFC. At the time I took out the mortgage I was not warned by the loan officer about how HFC uses (abuses) the 'deferred interest' feature of a simple interest loan.

I have accumulated $1,552.78 over the last three years in deferred interest on a $30,000 loan. A portion (approximately $900) of that was due to being late by only a matter of days on three occasions. While I am not happy about that I do accept that I incurred the extra interest because my payments were late.

The rest of the amount (almost $600) is because I paid my loan early on multiple occasions in an attempt to put more towards the principle. I could not understand why on my next statement I was charged deferred interest and no portion of my payment was being applied to the principle owing on the loan.

After many phone calls trying to get an explanation of what was going on I was finally directed to a local HFC office and was able to speak to someone who could at least explain it - sort of. Apparently even though my due date is the 25th of each month they were readjusting my due date every time I made a payment early and then charging deferred interest beginning on the 31st day after whenever the last payment was made.

For example, in June I made my payment early, on 6/18. In July I made my payment on the due date documented in my loan agreement - 7/25. Because I made the payment on 7/25 (when it was due according to my agreement) instead of 6/18 - thirty days after my last (early) payment - I was charged 8 days of 'deferred' interest which will be tacked onto the end of my loan.

This is unbelievable! The loan officer tried to convince me that everything will come out even in the end but I quite frankly don't believe it and from what a hard time he had justifying it I don't think he did either.

This entire company is a scam and should be put out of business. If anyone has any suggestions on what to do about this I would love to hear them.

Amy lou
Hamburg, New York

This report was posted on Ripoff Report on 08/20/2008 12:03 PM and is a permanent record located here: http://www.ripoffreport.com/reports/household-finance-corporation/nationwide/household-finance-corporation-deferred-interest-even-when-payment-is-made-early-a-cant-w-364967. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year.

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Updates & Rebuttals

#1 Consumer Suggestion

Here's a different explanation.

AUTHOR: Nikki - (U.S.A.)

Here's a different explanation and how simple interest loans work. HFC may do it differently, but here's the gist.

Say your payment is due January 1st. You make the first payment on January 1.

Then, you make the February payment on January 20th. Your payment should be charged for 20 days of interest and the rest to principal.

Then, you make the March payment on March 1. Your payment would be charged for 40 days of interest and the rest would go to principal. But, guess what, you probably didn't pay enough to cover the xtra 10 days.

Here's the kicker. Say your payments are $800 per month. Say you are within the first few years of your loan. Out of that $800 per month, on a 30 day payment schedule, you could be paying $770 to interest and $30 to principal. $770 interest divided by 30 days = $25.66 per day. So, when you went to 40 days, because you didn't add another $256.60 to your payment for the additional 10 days, that went to the back of your note as deferred, unpaid interest.

Go back to the statement you received after you paid earlier than the 30 days. Was the principal balance reduced by more because of the 10 days early? It should have been.

Another thing I noticed with HFC. Say your payment is due on the 1st, but the origination date was around the 20th. Your first payment, even if paid ontime, could result in 10 days of deferred interest being added to the back of the loan. This is because they often don't charge for the extra 10 days interest at closing.

If you have an interest only loan or a reverse mortgage loan, the above does not apply. I'm not too sure how those work.
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