Settlement figure 2 quick question.

andys15

I have a 5 year tesco credit card loan. 12000 at 8.3%. I have made 8 payments of 242.30p. How do you work out the settlement figure. I know I get charged 2 months interest.

overall cost of the loan is : 14538
8 payments is : 1938.40p
I believe but not quite sure is that I pay 42.30 interest. My working out therefore is : 12000- 1600 (paying of the loan w/o interest) = 10400 plus 2 x interest charge 84.60. therefore a settlement figure of 10484.60p. Is this correct.

Am I also correct in saying that a loan from the highstreet, ie upto 25000, the settlement figure will always be less than the amount borrowed. for instance get a loan of 25k over 5 years = about 32k with interest. If after 10 months you wanted to settle, the figure will still be less than 25k

many thanks

CLAPTON

at the beginning of the loan you pay
12,000 x 8.9% /12 per month i.e. about £86 and the rest of your monthly payment reduces the capital amount outstanding.

as you pay a little of the capital each month then the amount of interest you pay drops

after 8 payment you owe about 10700
so the monthly interest will be 10700 x 8.9% /12 = 76 per month

the exact figure will depend upon exactly when you made the first payment in relation to the date of the loan so can vary quite a bit


its a bit complicated to work out but you could try googling 'loan amortisation' ..most will be for mortgages but the same principle apply

For a standard loan with no PPI or payment free periods then yes the settlement balance will be less than the original loan amount once a few months have gone by