The importance of tick boxes

I received a telephone call from the Macquarie bank. They said I was behind in my repayments. And we all know what that means. If you don’t keep up with the repayments for something it gets taken away from you.

It’s Macquarie Bank that funds my home loan for Virgin Money. I wonder why Virgin doesn’t fund its own loans. I would have thought Virgin was big enough. Anyway, the person from Macquarie rang to say that I was behind in my repayments by $1339.13. I recall that amount being flagged as my first repayment in an email that had been sent to me.

This was disappointing news, and disturbing. I had thought the repayments would have been the least of my worries. I had a job, I could afford the repayments, and salary deductions had been set up. So what was going on?

In my previous home loan I was aware of the importance of making as many early repayments as possible. A lesson from a few years previously sprang to mind. I’d taken out a small loan with a Tasmanian cooperative building society. The loan was only for a few thousand dollars. The person setting up the loan asked if I would like to delay the repayments by a few weeks, or was it months. I can’t remember. It sounded like a generous offer, and I never questioned it. I only thought how generous it seemed. That was my mistake. Financial organisations aren’t generous. I didn’t enquire further, and I was stung.

When the loans officer had made the offer, I had assumed she had meant:

• we can put a freeze on the repayments and interest charges,
• you can have this loan now,
• make no repayments for x amount of time, and
• you will be no worse off than had you started making your repayments straight away.
  

The loans offer should have said:

• we’ll allow you to skip the first few repayments for x amount of time, but
• interest will accrue and add to your principal based on our current charges.
  

The principal grew much higher than I thought reasonable, and it took me a long time to get it below the amount I’d borrowed in the first place. Had I known what was about to take place from the inception I would have declined the offer. The loans officer was did not fully explain the ‘offer’ and I didn’t pursue the details.

With that lesson in mind, when I went along to Westpac for a home loan I was adamant about when my first repayment would begin. I had things worked out in my mind such that when the loan took effect (settlement), I had my first repayment going into my account on the very next business day. There’s not a lot of interest that can accumulate in one day, but my first repayment dropped the principal more than would have happened had I waited for a fortnight or so before the first repayment was made.

So, when Macquarie rang to tell me that nothing was being paid off my home loan I was astonished. I explained to the disinterested person who rang that I had about $90,000 in an offset to the loan. I believe the way this works is that if I make repayments greater than the minimum my offset is increased by the difference. If I make repayments that are less than I should, or presumably if I don’t make any repayments the offset amount is reduced, but the loan keeps getting repaid. Actually, I don’t make repayments to the home loan account, but make deposits into the offset account. Presumably, funds flow on a periodic basis from my offset account to the home loan account. So, what was going on?

After some telephone calls, lots of people checking on things, it got fixed. It turned out that when the loan was being set up (was that by Virgin or Macquarie; who knows) someone forgot to start the automatic transfer of funds system. Some tick box on some computer screen somewhere had been left un-ticked. Was that some form I had forgotten to complete and send away, I enquired? No, it was something that gets done their end, and someone just forgot to do it.

I was reassured that everything would be okay in the future. But I wondered how much my principal had increased because no repayments have been made. They say they will look into that aspect. And I thought the problems were over. Thankfully, I had deposited my tax return into the account not so long ago, which would have helped. Though, it makes you wonder about the people who run the financial world.