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[MSE Martin]

This thread is specifically to discuss the content of the

Interest Rates: Everything you've ever wanted to know

To discuss or ask a question about this article: click reply


PS IF THIS ISN'T EVERYTHING YOU WANTED TO KNOW AND THERE'S MORE... THEN ASK ABOUT IT BELOW AND I WILL TRY AND ADD IT WHEN I DO AN UPDATE.... Martin

[kevin_M]

I was just thinking about this the other day . Thanks Martin

Everything I have ever wanted to know

[MSE Archna]

Thanks Gary,

That's been amended.

[kathfisch]

Thanks for this article Martin - very interesting and informative!!

I shall continue to bore the p@nts off my family with moneysaving info, thanks to this

[kennyh]

Hi Martin,
Is there a threshold beyond which interest rates might be unlawful. In short where does 'flaming high' (like bank overdraft int rates) become usurious.

[juguete]

Also worth checking if these APR's include security release fees (which apparently banks can legally collect without even giving customers notice).

Also, do you have the sums in a spreadsheet formula the calculations? I get the idea but how do you calculate the APR for the loan that starts at 4.5% for two years then moves to 6.5% for the remaining 23 years.

Thanks in advance

[charlie12]

Great guide, thanks.

I've since noticed how credit card providers don't actually use the term APR after the percentage when stating balance transfer rates, because the rate doesn't include the balance transfer fee.

For example the Virgin card states:

0% p.a. on balance transfers for 12 months
0% p.a. on purchases for 3 months
15.9% APR typical rate (variable)

Very sneaky, I hadn't noticed this before. From casually looking at the rates one would assume that all three rates are APR rates.

I guess this is how they can get away with stating 0% when the APR is actually higher when taking account of the fee. One can no longer make an "easy" comparison as the fees differ.

Dodgy stuff, I hope the FSA put rules in place to force card companies to show the true APR rates.

[polka.dot]

Martin,

Under "The thorny issue of tax and interest" you said:

Higher Rate Tax. Those who pay the higher rate of tax (roughly those who earn over £38,335 in 2006/7) pay 40% on both.

Yet the Inland Revenue says those who earn over £3300 pay 40% tax - see http://www.hmrc.gov.uk/rates/it.htm

Am I missing something? Can you please explain?

[chani1]

thanks good to know

[jamesd]

polka.dot, the amount is based on taxable income, after the personal allowance has been deducted from income. For 2006-2007 that means the higher rate threshold is 5035 personal allowance plus the 33300 taxable income threshold. This is the 38335 figure given in the article.

[Justine M]

I had a salesman from Dolphin bathrooms 'round last weekend. He quoted me £9,000 for a new bathroom if I took out finance with GE Capital, when I said I was wary of taking finance and would rather wait until I had saved up (how long would that take!) he said if I paid without the finance option the bathroom would cost me £10,116.
I asked him what the APR was and he said I didn't really mean the APR, what I meant was the interest rate, which was 19%, but having a sneaky look at his paperwork, the APR was quoted as 24%.
Can anyone help me understand this? Is it really cheaper to take the finance (over 10 years but you can pay it off at any time, monthly amount 'roughly' £160.) Why did he choose not to tell me the APR? Why do I feel like he's manipulating me! Is he in breach of the FSA to not disclose the APR or provide me with any breakdown of how he got to the £9,000 figure?
In the end I had to give him a cheque for £100 to 'hold' the price whilst we thought about our options. It was the only way he was going to leave, after 3 hours!
THANKS!

[polka.dot]

Thanks James, all's clear!

[jamesd]

Justine, it sounds as though you were seeing made-up figures with lots of profit margin that were adjusted to make the finance option seem cheaper. Maybe he gets more commission that way.

I'd have been tempted to invite him to leave now or leave after a nice chat with the local police.

[Gorgeous George]

Justine

Send a registered letter to cancel and request your money back.

Even if you lose the £100, walk away.



GG

[sumosumo]

I'd appreciate help:

I have an A&L loan, without any insurance for sickness etc:
loan amount: £6400, Monthly Payment £193.25, Term 36 months, Total amount payable £6957.

I need to calculate the daily capital and interest I am paying, this is so I can reclaim the intrest from HMRC, a forumla would be helpfull, Now comes the difficult part..

The interest on this personal loan is calculated on the basis that the borrower will be paying off part of the loan (capital) each month on your chosen term (36 months). This results in a LARGER amount of interest being attributable in the early months of the agreement than in the LATER months.

A&L say they cannot provide the figures / formula.

HMRC insist on exact monthly calculations.

Thanks.

[grumbler]

This article is about interest rates - and you even don't quote your APR!
I spent 10 minutes calculating it ... 5.5%.

Use this calculator and see the resulting 'Amortization Table'.
Another calculator is this one (to see the full table click 'Details' button).
As interest is calculated monthly, I think you can get daily figures just by dividing the monthly ones by the number of days in the month.

Also, you can use Excel. Your monthly interest is 5.5%/12=0.45833%.
There is a special function 'PPMT' that 'returns the payment on the principal for a given period for an investment based on periodic, constant payments and a constant interest rate'. In your case the Excel notation is:

=PPMT(0.45833%,n,36,6400)

Here n=1,2,3,...36 is the number of the month.
Interest payment for the corresponding month is

=193.25-PPMT(0.45833%,n,36,6400)

[Joe_Bloggs]

@Charlie12
The FSA don't regulate credit cards. I think it is down to the Office of Fair trading to cut out misleading credit card ads.
J_B.

[PoorDave]

Originally Posted by Justine M

I had a salesman from Dolphin bathrooms 'round last weekend. He quoted me £9,000 for a new bathroom if I took out finance with GE Capital, when I said I was wary of taking finance and would rather wait until I had saved up (how long would that take!) he said if I paid without the finance option the bathroom would cost me £10,116.
I asked him what the APR was and he said I didn't really mean the APR, what I meant was the interest rate, which was 19%, but having a sneaky look at his paperwork, the APR was quoted as 24%.
Can anyone help me understand this? Is it really cheaper to take the finance (over 10 years but you can pay it off at any time, monthly amount 'roughly' £160.) Why did he choose not to tell me the APR? Why do I feel like he's manipulating me! Is he in breach of the FSA to not disclose the APR or provide me with any breakdown of how he got to the £9,000 figure?
In the end I had to give him a cheque for £100 to 'hold' the price whilst we thought about our options. It was the only way he was going to leave, after 3 hours!
THANKS!

If you want the product, and can pay the "finance" back at any time consider taking it out then paying it off using a cheaper loan or credit card.

The £100 holding fee sounds like testicles (!), and you should have turfed him out penniless at that point.

£9k for a bathroom sounds like a £$%^% lot of money! What do you actually get for that?

[kenshaz]

JUSTINE M Run away from that one,high price and high interest,Dolphin do a good product but they are very expensive,value for money is what you want ,and cheap credit.The reason that they are so dear is because the salesman gets a cut ,then the surveyor gets a cut ,then the fitter gets a cut,not forgetting Dolphin ,a lot of people with slices of your cake.

[Rafter]

Originally Posted by charlie12

Great guide, thanks.

I've since noticed how credit card providers don't actually use the term APR after the percentage when stating balance transfer rates, because the rate doesn't include the balance transfer fee.

For example the Virgin card states:

0% p.a. on balance transfers for 12 months
0% p.a. on purchases for 3 months
15.9% APR typical rate (variable)

Very sneaky, I hadn't noticed this before. From casually looking at the rates one would assume that all three rates are APR rates.

I guess this is how they can get away with stating 0% when the APR is actually higher when taking account of the fee. One can no longer make an "easy" comparison as the fees differ.

Dodgy stuff, I hope the FSA put rules in place to force card companies to show the true APR rates.

Charlie,

It is the rules that are to blame to be honest.

A card can only have one APR and it has to be based on what it would cost in interest after any promotional period to borrow £1500 and pay it back in 12 equal installments. It must also include any annual fee or other charges.

Any other interest rate quoted must not be called an APR and the APR must be the biggest and boldest interest rate shown in any advertising.

I agree though. No company should be able to quote 0% when it isn't really as a result of fees, just like car dealers or the dodgy dolphin salesman should not be able to quote interest rates that are not the APR.

R.