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  • FIRST POST
    • britishboy
    • By britishboy 5th Feb 18, 11:48 AM
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    britishboy
    Is total loan interest added from the start?
    • #1
    • 5th Feb 18, 11:48 AM
    Is total loan interest added from the start? 5th Feb 18 at 11:48 AM
    I took out an M&S loan on 21st May 2016 for £12,000 over 72 months, with repayments at £200 a month @ 6.3% interest.

    I called today for a balance and to make an overpayment and before I overpaid £300, was told the balance was £10,377

    Does that sound right please? Was expecting having paid 20 installments of £200 back I'd of paid off more than £1,623?
Page 1
    • Mahsroh
    • By Mahsroh 5th Feb 18, 11:53 AM
    • 305 Posts
    • 265 Thanks
    Mahsroh
    • #2
    • 5th Feb 18, 11:53 AM
    • #2
    • 5th Feb 18, 11:53 AM
    Yes, the interest will be added to the loan up front (so the balance will show the interest) - typically different to a Mortgage.


    Whilst the balance was £10,377 I suspect that will assume that you continue to make your usual monthly payments. So if you'd asked for a settlement figure (i.e. to pay the entire balance today) it should have been less than the £10,377 balance.


    In round figures:
    £12000 loan
    Interest £2400
    Total £14400


    You've made 20 payments of £200 (£4,000), therefore owe £10,400 - or £10,377 to be exact.
    Last edited by Mahsroh; 05-02-2018 at 4:37 PM.
    • zx81
    • By zx81 5th Feb 18, 11:57 AM
    • 15,522 Posts
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    zx81
    • #3
    • 5th Feb 18, 11:57 AM
    • #3
    • 5th Feb 18, 11:57 AM
    The interest is charged and added daily, not upfront. More interest is charged at the start of the loan than the end, as the capital is higher.

    That is why you had hoped to have paid off more than you have. Early payments are mostly interest.

    The balance may be displayed with total interest, or interest to date Either way, the maths is the same.
    • poppasmurf_bewdley
    • By poppasmurf_bewdley 5th Feb 18, 12:34 PM
    • 5,114 Posts
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    poppasmurf_bewdley
    • #4
    • 5th Feb 18, 12:34 PM
    • #4
    • 5th Feb 18, 12:34 PM
    I took out a loan with the Halifax for £8k on December 8th 2017 for a new(ish) car at a rate of 3.5%

    The loan shows on my Halifax online account like this:

    Date. Amount borrowed - 8000.00
    Date Interest Charged - 18.87
    Date Balance - 8018.87
    Date Payment Made - - 145.33
    Date Balance - 7873.54
    Date Interest Charged - 23.04
    Date Payment Made - 145,33
    Date Balance - 7751.25
    "There are not enough superlatives in the English language to describe a 'Princess Coronation' locomotive in full cry. We shall never see their like again". O S Nock
    • Mahsroh
    • By Mahsroh 5th Feb 18, 12:53 PM
    • 305 Posts
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    Mahsroh
    • #5
    • 5th Feb 18, 12:53 PM
    • #5
    • 5th Feb 18, 12:53 PM
    I took out a loan with the Halifax for £8k on December 8th 2017 for a new(ish) car at a rate of 3.5%

    The loan shows on my Halifax online account like this:

    Date. Amount borrowed - 8000.00
    Date Interest Charged - 18.87
    Date Balance - 8018.87
    Date Payment Made - - 145.33
    Date Balance - 7873.54
    Date Interest Charged - 23.04
    Date Payment Made - 145,33
    Date Balance - 7751.25
    Originally posted by poppasmurf_bewdley

    That's how it's done with my Halifax mortgage too.


    In the OP's instance though I'm certain the figure they quoted him includes the full interest..... Just going on the simple maths. If OP asked them for a settlement figure to close it today it will have been less than the £10,377 they quoted as the "balance"
    • TrickyDicky101
    • By TrickyDicky101 5th Feb 18, 3:18 PM
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    TrickyDicky101
    • #6
    • 5th Feb 18, 3:18 PM
    • #6
    • 5th Feb 18, 3:18 PM
    That's how it's done with my Halifax mortgage too.


    In the OP's instance though I'm certain the figure they quoted him includes the full interest..... Just going on the simple maths. If OP asked them for a settlement figure to close it today it will have been less than the £10,377 they quoted as the "balance"
    Originally posted by Mahsroh
    I agree - I think you worked out the situation exactly in your first post above (albeit minor typo on your interest quote above ).

    It's an interesting way of doing is isn't it? Why not quote it properly and avoid perpetuating ignorance in those who take the loans and those who man the call centers of the lenders.
    • Mahsroh
    • By Mahsroh 5th Feb 18, 4:36 PM
    • 305 Posts
    • 265 Thanks
    Mahsroh
    • #7
    • 5th Feb 18, 4:36 PM
    • #7
    • 5th Feb 18, 4:36 PM
    (albeit minor typo on your interest quote above )
    Originally posted by TrickyDicky101

    Good spot!! Edited!


    HSBC do it the same way as per the OP's scenario. Took a £15k loan out with them and immediately on day one my balance was showing as £16,250ish, even though if I'd rang them up the next day to settle the loan it would have (in theory) been £15,001.36!
    Last edited by Mahsroh; 05-02-2018 at 4:39 PM.
    • cmc_entertainment
    • By cmc_entertainment 5th Feb 18, 5:28 PM
    • 328 Posts
    • 377 Thanks
    cmc_entertainment
    • #8
    • 5th Feb 18, 5:28 PM
    • #8
    • 5th Feb 18, 5:28 PM
    Try this spreadsheet

    http://www.servethemembers.com/images/Loan_Amortization_Daily.xls

    Very accurate to the pence if you input the correct figures interest and amount from the beginning
    <mythbuster>
    Failure is always an option
    </mythbuster>
    • fozmcfc
    • By fozmcfc 6th Feb 18, 2:53 PM
    • 2,998 Posts
    • 2,188 Thanks
    fozmcfc
    • #9
    • 6th Feb 18, 2:53 PM
    • #9
    • 6th Feb 18, 2:53 PM
    My last loan with Natwest for £7500.

    The balance showed £7500 at the beginning, then each month it would reduce by my £324 odd pence payment and then an amount of interest would be added such as £21.20.

    By the end the interest naturally the balance was lower, so the interest added was lower around £6 or £7 odd.
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