Actuarial formulas - nerdy question

emcwill

A technical question any help gratefully received!

I have a personal loan with Northern Rock at 7.9%, using Martin's ideas I'd like to BT the outstanding balance from a 4.9% lifetime BT card (BA Amex) to my Egg Money card and use that to super BT the outstanding loan. The thing is I've only made 2 payments to the loan and the next is due on 1 December. I've established with NR that the rule of 78 isn't applicable as the loan was arranged in August 05, but they say they still front load interest charges using the "actuarial formula". I tried googling this and even with grade A maths A-level (some years ago!) I can't possibly understand it!!

According to NR my outstanding balance is £5312.03, projected to 20 January. Due to any front loading of interest charges should I get onto the 4.9 rate ASAP or wait for the next payment of approx. £171 to go out (they seemed unable to explain whether this figure takes into account the next payment or not). I don't understand at what point I stop loosing out due to the way they front load charges.

Yes, nerdy question but I'd really like to know. Martin, are you there???

emcwill

PS Forgot to say, loan was for £5500.

Robert_Sterling_3

Non Standard Term "Front Loaded"

It might just mean that each monthly payment is not made up of the same amount of Principal and the same amount of Interest.

In other words half way through a loan you have not paid back half of the loan.

The fact remains that you are paying 7.9% on the outstanding capital.

If you can shift it to 4.9% do so sooner rather than later.

Rafter

I'm not sure what they mean either. NR don't seem to be charging early settlement fees though, and this early into the loan you may as well transfer to reduce your rate.

Total saving over the 3 years should be around £75.

R.

emcwill

Thanks so much to Robert and Rafter. I understand that front loading means skewing interest charges to earlier payments (just as ro78 did!) but can't get much further than that. I really just wanted to be sure that I wouldn't actually be losing out by shifting the debt. I'm still curious to know how this "actuarial formula" works (in simple-ish terms) if anyone knows.

I was also hoping I'd be saving more than 75 quid over the term with the 3 p.c. rate drop but hey-ho, at least a credit card debt is more flexible than a loan...