Need Help Calculating APR on loan

kindofagilr

Hello all,

OH got a loan out for £10,000 in 2005, in 2009 (jan) we extended the loan to £21,000 (to pay for mortgage on house) I was under the impression we DIDNT have PPI on the loan (as I thought OH had cancelled it off the original loan in 2007), but now I am not so sure and I am wondering if you can help me figure it out.

Our loan is for £21,000 we are paying it over 7 years (84 months) at a APR of 12.4% we pay £368 a month (which brings the total at the end of the loan £30,912)

So I have tried to work out what 12.4% equals in the loan, this is how I come to it

£21,000 divided by 100 = £210 (1%) x 12.4 - £2604 does that mean that the amount we should be paying back is £2604 + £21,000 = £23,604? which only comes to £281 per month?

Or have I got my maths totally wrong?

Thanks for your help guys

Typhoon2000

That sounds about right, I make it £375 per month at 12.4% APR, so it seems you are not paying for PPI

Rafter

Your maths is wrong.

What you have calculated is the first years interest, if you weren't making payments each month to start reducing the loan.

If you have access to a spreadsheet you can try the following formula:

=PMT(((1+12.4%)^(1/12)-1),84,21000,0) = £367.87

Which seems to confirm that your payment is right.

The monthly interest on your loan is (1+12.4%)^(1/12)-1 = 0.979%

So in January 2009 your interest bill would be £21,000 x 0.979% = £206

You then pay £368 off to leave a balance of £20838 (£21,000 + 205 - 368)

In February 2009 your interest bill is £20,838 x 0.979% = £204

And so on.

So each month you pay a little less interest and a bit more off your loan so in 84 month you will have paid the lot.

The total interest bill over 7 years will be £9,900.

At some point, once you have saved an emergency fund, you may want to look at trying to overpay the loan or get the APR down. 12.4% is a high interest rate.

You could add the loan to the mortgage next time it is up for renewal if you have enough equity, although you are putting your home at risk by doing so.

Good luck

R.

Rafter

PS - so you aren't paying PPI

kindofagilr

Thanks guys

Man I am stupid lmao

Yes we have been looking into overpaying the loan, OH rang them the other day to ask if there are any penalites in overpaying and they said no as long as it wasnt like a lump sum settlement figure.

So we are going to start doing that ASAP, then in a few years time we are hoping to use the loan money to overpay the mortgage as well (thats our long term plan)

I was thinking about looking around at a lower interest rate loan to help us in the meantime but I havent done that yet

Thanks again