Quick APR Question

Devo

I took out a £6500 loan with Egg last month at 7.9% APR. They are now offering 6.9% APR on their loans and so I enquired about getting the lower rate. They have responded by saying that they cannot simply reduce my interest rate (fair enough), but they would do it if I were to 'top my loan up'. Is it gonna be worth me taking out an extra top up on my loan , therefore reducing my APR by 1% or should I just stick with my loan at 7.9%? PS - my loan is over 36 months

Me_Myself_2

Ask them for the exact figures. Say you want to pay the new loan (for say £7000) off in the same timescale. I.e. 1 or 2 months less than the original loan. You'll need to know exactly how much the redemption figure is as they will have added interest on.

Devo

This sounds a bit obvious, but could I take the top up of say an extra £500 and then just pay that back off the loan once I have secured the lower interest rate? One of the beauties of Egg loans is that they let you make over payments at any time without penalty and you can pay off early without penalty... is this too good to be true e.g. take out extra £500 and pay it straight back off again so I have £6500 again?

Me_Myself_2

Set up / arrangement costs?

maforduk

I would take the extra £500 out and pay £500 straight back off the loan
It sounds like a loophole on their part!

Me_Myself_2

If you pay the same amount, it will be cleared about 1 month earlier at the lower rate. This assumes a 3 yr loan paying £200 pm and overpayments allowed without penalty and no set up fees. Remember they may also do another credit check.

Devo

I think I've just calculated that I will only save approx £107 over the 36 months if I get the lower rate and pay the £500 back instantly. This assumes no over payments however (something that I probably intend to start doing) :cool:

avi_3

I too asked them the same and they gave me the same reply, but cautioned saying it was typical apr and that they cannot guarentee the low apr , until i actually went ahead with the process.
I also have another query - my egg laon was for 10000. I pay £243 per month over 48 months, and have made 3 payments already. The balance is shown as only £9271. But if i were to add the interest on top of the £10000, it would be a total of £11,695, and so the balance should actually show as £10966 (11695-729). So i am confused. Has anyone else who has a egg loan, had similar experience?

maforduk

They'll probably add it on every quarter or something!

magentadreamer

Egg calculate the interest on a daily basis according to their blurb on the web site. So basically you pay alot of interest plus a small capital payment at first then it gradually gets to be more and more capital and less interest. Dunno why you can't see the interest added tho'.