MoneySavingExpert Chair, Martin Lewis · Editor, Marcus Herbert

# Interest Rates: Everything you ever wanted to know Article Discussion

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• Posts: 30 Forumite
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Thanks James, all's clear!
• Posts: 26,103 Forumite
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Justine, it sounds as though you were seeing made-up figures with lots of profit margin that were adjusted to make the finance option seem cheaper. Maybe he gets more commission that way.

I'd have been tempted to invite him to leave now or leave after a nice chat with the local police.
• Posts: 7,964 Forumite
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Justine

Send a registered letter to cancel and request your money back.

Even if you lose the £100, walk away.

GG
There are 10 types of people in this world. Those who understand binary and those that don't.
• Posts: 4 Newbie
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I'd appreciate help:

I have an A&L loan, without any insurance for sickness etc:
loan amount: £6400, Monthly Payment £193.25, Term 36 months, Total amount payable £6957.

I need to calculate the daily capital and interest I am paying, this is so I can reclaim the intrest from HMRC, a forumla would be helpfull, Now comes the difficult part..

The interest on this personal loan is calculated on the basis that the borrower will be paying off part of the loan (capital) each month on your chosen term (36 months). This results in a LARGER amount of interest being attributable in the early months of the agreement than in the LATER months.

A&L say they cannot provide the figures / formula.

HMRC insist on exact monthly calculations.

Thanks.
• Posts: 58,629 Forumite
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I spent 10 minutes calculating it ... 5.5%.

Use this calculator and see the resulting 'Amortization Table'.
Another calculator is this one (to see the full table click 'Details' button).
As interest is calculated monthly, I think you can get daily figures just by dividing the monthly ones by the number of days in the month.

Also, you can use Excel. Your monthly interest is 5.5%/12=0.45833%.
There is a special function 'PPMT' that 'returns the payment on the principal for a given period for an investment based on periodic, constant payments and a constant interest rate'. In your case the Excel notation is:

=PPMT(0.45833%,n,36,6400)

Here n=1,2,3,...36 is the number of the month.
Interest payment for the corresponding month is

=193.25-PPMT(0.45833%,n,36,6400)
• Posts: 4,535 Forumite
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@Charlie12
The FSA don't regulate credit cards. I think it is down to the Office of Fair trading to cut out misleading credit card ads.
J_B.
• Posts: 952 Forumite
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Justine_M wrote:
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%.
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!

If you want the product, and can pay the "finance" back at any time consider taking it out then paying it off using a cheaper loan or credit card.

The £100 holding fee sounds like testicles (!), and you should have turfed him out penniless at that point.

£9k for a bathroom sounds like a £\$%^% lot of money! What do you actually get for that?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery
• Posts: 3,155 Forumite
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JUSTINE M Run away from that one,high price and high interest,Dolphin do a good product but they are very expensive,value for money is what you want ,and cheap credit.The reason that they are so dear is because the salesman gets a cut ,then the surveyor gets a cut ,then the fitter gets a cut,not forgetting Dolphin ,a lot of people with slices of your cake.
[FONT=Arial, Helvetica, sans-serif]To be happy you need to make someone happy.[/FONT]
• Posts: 3,850 Forumite
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charlie12 wrote:
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.

Charlie,

It is the rules that are to blame to be honest.

A card can only have one APR and it has to be based on what it would cost in interest after any promotional period to borrow £1500 and pay it back in 12 equal installments. It must also include any annual fee or other charges.

Any other interest rate quoted must not be called an APR and the APR must be the biggest and boldest interest rate shown in any advertising.

I agree though. No company should be able to quote 0% when it isn't really as a result of fees, just like car dealers or the dodgy dolphin salesman should not be able to quote interest rates that are not the APR.

R.
Smile , it makes people wonder what you have been up to.
• Posts: 4 Newbie
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grumbler wrote:
I spent 10 minutes calculating it ... 5.5%.

Use this calculator and see the resulting 'Amortization Table'.
Another calculator is this one (to see the full table click 'Details' button).
As interest is calculated monthly, I think you can get daily figures just by dividing the monthly ones by the number of days in the month.

Also, you can use Excel. Your monthly interest is 5.5%/12=0.45833%.
There is a special function 'PPMT' that 'returns the payment on the principal for a given period for an investment based on periodic, constant payments and a constant interest rate'. In your case the Excel notation is:

=PPMT(0.45833%,n,36,6400)

Here n=1,2,3,...36 is the number of the month.
Interest payment for the corresponding month is

=193.25-PPMT(0.45833%,n,36,6400)
Many thanks grumbler.. apologies.. just forgot to show APR (APR is 5.6).

The calculation difficulty relates to my 3rd para.. in that, it is an industry standard to front-load interest in the earlier months, therefore one cannot simply divide total interest amount by days of period.

I was hoping that someone in the industry could provide the unknown 'loading' as without this the math cannot be done.

I have again called A&L who have promised to send out a factsheet, however I doubt this will provide the formula.

Thank you for your kind time.

Sincerely
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