How to calculate APR on a personal loan

Hayden1

Hi everyone

A bit of a long winded one but here goes....

I currently have a personal loan of £22K with the APR set at 6.1%, which is payable over 84 months. The total loan including interest is £27,250. I am trying to calculate how the interest of £5,250 is achieved and for the life of me I cannot work it out. I know APR is accrued annually however I still can't get the figures to tally up? Can anyone please let me know what the calculation is to achieve these figures?

From here I then want to work out some separate calculations based upon another set of figures for example...

If I need a loan of £15,000 payable over 3 years how do I go about working out the additional interest owed if the interest is set at say 2%, 4% or 6%? The reason I ask is that I maybe borrowing some money from a family member at a lower rate than currently being offered by the Banks and we are trying to agree terms based upon the same methods of calculation that the financial institutions use.

Many thanks in advance!

MrBG

Hello Hayden1

Your loan probably operates on a monthly basis rather than on an annual basis, at 6.1% divided by 12 (0.5083) to give the monthly figure. The APR is probably an EAR

The calculation you need is to mutiply the £22k x 1.05083 to show the interest in month one. Deduct your payment, and this will give your remaining balance for the beginning of month 2 (and so on)

I know this sounds complicated - the much easier way to work this out is to use a repayment mortgage calculator (loads available through this site or google) which will operate in the same way.

CLAPTON

try

http://www.whatsthecost.com/loan.aspx

Hayden1

That's great many thanks for the quick response!

booi666

hHi there,
ive just been on the link and the figures that come up are not the same as my figures on paper.
There not out by alot but they are out.

~Brock~

booi666 wrote: »

hHi there,
ive just been on the link and the figures that come up are not the same as my figures on paper.
There not out by alot but they are out.

Are there any admin or accepatnce fees on the loan? If so then these will also reflect in the APR calculation because they are part of the overall cost of borrowing. This may explain the difference.

booi666

Hi there,
There was no acceptance fee or anything like that,according to the link overall i will pay back about £90 more at the end of the loan and my monthly payments should be £1cheaper than what they are.£1 isnt alot but i dont want to give the robbing !!!!!!s anymore than i should

~Brock~

Please bear in mind that the website does have what appears to be a disclaimer stating that it is not 100% accurate, but a near approximation.

I've no idea which lender you are referring to, so cannot comment on your opinion of them as being robbing !!!!!!s, but I am sure this wasn't your frame of mind when you signed the agreement. Isn't is amazing how views change so easily when money is involved?

booi666

~Brock~ wrote: »

Isn't is amazing how views change so easily when money is involved?

I totally agree with you,
The thing is lenders have an unfair advantage over borrowers in that people dont fully understand whats going on before there very eyes!!
One would hope that the people you entrust are being honest but saying that they are here to make money out of that,knowing you may or may not know how the finance system works:eek:

CLAPTON

booi666 wrote: »

Hi there,
There was no acceptance fee or anything like that,according to the link overall i will pay back about £90 more at the end of the loan and my monthly payments should be £1cheaper than what they are.£1 isnt alot but i dont want to give the robbing !!!!!!s anymore than i should

was the first payment exactly 1 month after you received the money?
did you have any payment free months at the beginning of the loan?

booi666

Hi there yes it was 1 month payment free.
The loan length was 62 months but even playing around with the months on the link doesnt tally up