Interest Rates: Everything you ever wanted to know Article Discussion

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MSE_Martin
MSE_Martin Posts: 8,272 Money Saving Expert
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edited 10 June 2010 at 3:06PM in Loans


This thread is specifically to discuss the content of the

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PS IF THIS ISN'T EVERYTHING YOU WANTED TO KNOW AND THERE'S MORE... THEN ASK ABOUT IT BELOW AND I WILL TRY AND ADD IT WHEN I DO AN UPDATE.... Martin
Martin Lewis, Money Saving Expert.
Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
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Comments

  • kevin_M
    kevin_M Posts: 551 Forumite
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    I was just thinking about this the other day :). Thanks Martin

    Everything I have ever wanted to know :)
  • Former_MSE_Archna
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    Thanks Gary,

    That's been amended.
  • kathfisch
    kathfisch Posts: 3,042 Forumite
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    Thanks for this article Martin - very interesting and informative!!

    I shall continue to bore the p@nts off my family with moneysaving info, thanks to this ;):D
    Don't stress, relax, let life roll off your backs. Except for death and paying taxes, everything in life is only for now... Avenue Q
    Official DFW Nerd Club - Member no. 003 :DProud to have become debt free... and striving to keep it that way
  • kennyh_2
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    Hi Martin,
    Is there a threshold beyond which interest rates might be unlawful. In short where does 'flaming high' (like bank overdraft int rates) become usurious.
  • juguete
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    Also worth checking if these APR's include security release fees (which apparently banks can legally collect without even giving customers notice).

    Also, do you have the sums in a spreadsheet formula the calculations? I get the idea but how do you calculate the APR for the loan that starts at 4.5% for two years then moves to 6.5% for the remaining 23 years.

    Thanks in advance
  • charlie12
    charlie12 Posts: 1,668 Forumite
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    Great guide, thanks.

    I've since noticed how credit card providers don't actually use the term APR after the percentage when stating balance transfer rates, because the rate doesn't include the balance transfer fee.

    For example the Virgin card states:

    0% p.a. on balance transfers for 12 months
    0% p.a. on purchases for 3 months
    15.9% APR typical rate (variable)

    Very sneaky, I hadn't noticed this before. From casually looking at the rates one would assume that all three rates are APR rates.

    I guess this is how they can get away with stating 0% when the APR is actually higher when taking account of the fee. One can no longer make an "easy" comparison as the fees differ.

    Dodgy stuff, I hope the FSA put rules in place to force card companies to show the true APR rates.
  • polka.dot
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    Martin,

    Under "The thorny issue of tax and interest" you said:

    Higher Rate Tax. Those who pay the higher rate of tax (roughly those who earn over £38,335 in 2006/7) pay 40% on both.

    Yet the Inland Revenue says those who earn over £3300 pay 40% tax - see http://www.hmrc.gov.uk/rates/it.htm

    Am I missing something? Can you please explain?
  • chani1
    chani1 Posts: 76 Forumite
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    thanks good to know
    :D
  • jamesd
    jamesd Posts: 26,103 Forumite
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    polka.dot, the amount is based on taxable income, after the personal allowance has been deducted from income. For 2006-2007 that means the higher rate threshold is 5035 personal allowance plus the 33300 taxable income threshold. This is the 38335 figure given in the article.
  • Justine_M
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    I had a salesman from Dolphin bathrooms 'round last weekend. He quoted me £9,000 for a new bathroom if I took out finance with GE Capital, when I said I was wary of taking finance and would rather wait until I had saved up (how long would that take!) he said if I paid without the finance option the bathroom would cost me £10,116.
    I asked him what the APR was and he said I didn't really mean the APR, what I meant was the interest rate, which was 19%, but having a sneaky look at his paperwork, the APR was quoted as 24%.:confused:
    Can anyone help me understand this? Is it really cheaper to take the finance (over 10 years but you can pay it off at any time, monthly amount 'roughly' £160.) Why did he choose not to tell me the APR? Why do I feel like he's manipulating me! Is he in breach of the FSA to not disclose the APR or provide me with any breakdown of how he got to the £9,000 figure?
    In the end I had to give him a cheque for £100 to 'hold' the price whilst we thought about our options. It was the only way he was going to leave, after 3 hours! :eek:
    THANKS!
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