APR/Interest per annum -figures help!!!

Danni.135

Hiya,

I have a ridiculously high interest loan with Welcome. I took it out in September last year.
I am looking to somehow get it paid off as soon as possible so that I can pay the least amount of interest as possible.

I just can't seem to work out the figures on the credit agreement.

Loan amount: £3756.06
Homecare 24 insurance (stupid to take it I know) £215
Total amount of credit: £3971.06
Acceptance fee £75
Interest charge £3764.36
Total charge for credit: £3839.36 - I can't understand how this figure is so high.
Total: £7810.46 over 36 months (scary!)

APR: 64.53%
Rate of interest per annum: 61.96%
What is the difference???

I pay £216.96 per month, I've paid 5 payments so far, the next which will be due on 25th March - so this will total £1301.76.
I have asked for a settlement figure but I am still waiting after 2 weeks and 2 calls. I would just like and I idea of what I have paid off in capital & interest, giving me an idea of the how much it would cost to pay off in full over the next few weeks.

If the total charge for interest is £3764.36 then monthly (over 36 months) I should be paying off £104.56 in interest shouldn't I? I am probably working this out completely wrong.

Some help is needed!!

Thanks in advance.

Danni :-)

Robert_Sterling_3

The interest per month is higher at the begining of the loan and gets less as you go on. The capital repayment is lower at the begining of a loan and gets higher as you go along. So the first month you hardly pay any of the loan off and the last month you hardly pay any interest.

You are paying a very very high rate of interest. I can only assume your are a "Very High Risk" borrower with a bad credit record.

I guess the settlement figure at present would not be much different from the amount you borrowed in the first place.

Danni.135

I was expecting it to be about the same as the starting figure, is it possible for it to be more as I am paying it off within the first year?

Regarding your comment about me bring very high risk and have bad credit this is untrue, the loan was taken out as a last resort for quick money. I am now in a position where I should be able to pay this off. You're opinion wasn't requested in my original post. I am fully aware that I was naive when I took the loan and I should have seeked other options, but I didn't, I will always take responsibilty of my credit and was merely asking for some help on my credit agreement. Please don't look down on me for this.

Thanks for your help anyway :-)

Robert_Sterling_3

I immediately apologised to you for suggesting that you were "very high risk".
For many years I was involved with "high risk" people but not one of them ever had an APR as high as 40% let alone one that was over 60% and so that is what I based my erroneous guess on. :embarasse

Robert_Sterling_3

1) Although it says that the total amount of credit is £3791.08.
....In fact the amount of the monthly payment is consistent with the fact that they
....have added the £75 acceptance fee to that total so that the total amount of credit
.is taken to be £4046.06

2) They make the total interest to be charged £3764
.....I make the total interest to be charged ..... £3764

Monthly Interest for 36 months

£165.89
£163.79
£161.61
£159.34
£156.98
£154.52
£151.96
£149.30
£146.52
£143.64
£140.63
£137.50
£134.24
£130.85
£127.32
£123.65
£119.82
£115.84
£111.69
£107.38
£102.88
£98.21
£93.34
£88.27
£82.99
£77.50
£71.78
£65.83
£59.63
£53.18
£46.47
£39.48
£32.20
£24.63
£16.74
£8.53

Total £3,764.14

Each month the amount of interest goes down because the outstanding balance goes down.

I have shown how much interest is paid in each month

3) The two interest rates.

The actual interest rate which is applied to the loan is a truly staggering rate of 64.53%

However the APR ... The Annual Percentage Rate ... has to be calculated in accordance with the Consumer Credit Act of 1974 and amendments thereto.

So when you took the loan there was an acceptance charge of £75.

I can see that you did not actually pay the fee but had it added to the loan. The consumer Credit Act say the £75 was not part of the loan and it treats it as if it were an interest payment on day one. Because of that the APR is higher and they tell you it is 64.53%

So as shown above the figures themselves are consistent and I can explain how they are arrived at..
...............................................................................................................................................

The interest rate applied to this loan is very very high indeed.

I think the law requires that a loan must not have an "extortionate" rate of interest.

Danni.135

Thanks very much for your help Robert, it's greatly appreciated. The sooner I stop having anything to do with this company the better...I've definitely learnt from this sill mistake.

What would be classed as extortionate amount of interest?

Robert_Sterling_3

The law does not state an exact number.
I know of one lender who drew the line at 39.9%.
However there are high risk clients and then again there are higher risk clients. The greater the risk to the lender the higher the interest rate will be.

~Brock~

Danni.135 wrote: »

Thanks very much for your help Robert, it's greatly appreciated. The sooner I stop having anything to do with this company the better...I've definitely learnt from this sill mistake.

What would be classed as extortionate amount of interest?

There isn't a clear answer to your question. The courts will take into consideration the rest of the marketplace and any risk factors in place at the time the credit was granted.

The term 'extortionate interest' as defined under sections 137-140 if the 1974 Act is now largely obselete, having being replaced by the much broader concept of unfair relationships.

The rate you have been charged is very high, yes, but not uncommon by any means so it may be difficult to play the unfair relationship card unless any other material facts can also be considered (maybe your previously clean credit rating?) - seek independant advice, but in the meantime don't stop paying otherwise you will risk damaging your credit rating!