help with "rule of 78" loan calculation?

shazndaz

Can someone please check my figures. I've used the dualcalc linked in the last post and tried using the formulas here but I still think my loan company have charged me too much.

Borrowed £9280 over 8 years (96 payments)
paid 12 payments of 155.97 = 1871.64
total to repay = 14,973.12 at an apr of 13.8% over 8 years
got charged £40 for missing a payment (with interest equals about £45)
£75 release fee
interest to October (they say I can settle any time up til' then) - 187.75
they say they can charge me 6 months interest for settling early as per their t&c's but have used the rule of 78 instead as that works out less. they say the early settlement fee is 324.56.
= settlement figure of £9205.52. Using Dualcalc I get it to at least £160 less.

Can anyone figure this out?

Tr@cker

First thing is why take a loan over such a long period in the first place if you can pay back in 3 years ? Also 9.6 % is not competitive.
Their are some loans available suck as Egg and Golfish that dont use rule 78 and you can settle up early without penalty or the hideous rule 78, have you considered applying for one of these ? It can actually work out cheaper even if the APR is bigger than having a lower APR on a rule 78 deal for early settlers.
Otherwise the calculations given here look correct, some lenders such as Liverpool Vic give you the formula applicable to rule 78 so that you can work out for yourself what the rebate should be at the point you want to settle up.

Tr@cker

Sorry but for some reason my last post has appeared on the wrong thread.

Slider

I have a loan with Abbey, taken out a while ago.

Loan was £14,000. over 60 months
APR was 6.9%
Cost per month 275.18

I have enquired about settling this loan and have been given the following numbers

Loan Outstanding 8805.76
32 payments left.

Interest rebate if settled "today" would be 596.82
Leaving a settlement figure of £8208.94.

?? What I would like to know is what is the interest rate on the remaining loan. i.e. if I wanted to borrow £8208.94 over 32 months with total interest charge of £596.82 would this be an APR of 4%, 3% ??????

Given that I cannot afford to do a balance transfer and pay it off in 9 months, I am trying to work out whether I should try to move this loan, or leave it where it is.

Any information appreciated

Rafter

Slider,

Done the sums and think if you managed to get a loan at 5.7% it would cost you £50 more in total over the next 32 payments than sticking with abbey.

The breakeven APR would be about 5.3%

Abbey seem to be charging you about £400 in early settlement costs, but this could well be right under rule of 78 and other calculation methods that might apply to a loan of this age.

I think you need to stick with it, unless you can persuade abbey to reduce your rate by kicking up a fuss about their settlement amount, how loyal a customer you have been etc etc etc.

Good luck.

R.

Slider

Rafter,

Thanks for that.

Abbey are using "rule of 78" and I think they penalise early settlement with 2 months interest charge.

savvy

Hi Slider, hope you don't mind, I've moved your thread here to keep like topics together, to aid you and others in the future.
Thanks
savvy

northantsandy

A great many loan companies say they have left Rule of 78 in favour of the 'new 1+1 calculation'.

What is it, how do you work it out and is it bette than Ro78?

northantsandy

Anyone know?

Robert_Sterling_3

northantsandy wrote:

A great many loan companies say they have left Rule of 78 in favour of the 'new 1+1 calculation'.

Can you give us the names of half a dozen of the companies concerned?