Interest Rates: Everything you ever wanted to know Article Discussion



  • jamesd
    jamesd Posts: 26,103 Forumite
    Name Dropper First Post First Anniversary
    Sorry to hear that you fell victim to the "flat rate" misleading practice, where you get charged interest on the whole amount intially borrowed until the loan is fully paid off. You don't pay less interest and more capital over time with a flat rate loan. APR of 8.4% is fairly low for that type of loan if it's the real APR not the flat interest rate (APR may be twice the quoted flat rate).

    If the ombudsman side doesn't go well or perhaps anyway, you can seek a loan from your bank at a lower APR. If your mortgage lets you do it you could also consider asking for a further advance from that to do this at the mortgage interest rate, then pay the money off the mortgage.
  • Rose_Crow
    Rose_Crow Posts: 393 Forumite
    First Anniversary Combo Breaker
    Sorry guys, dozy question: How you work out the net AER on interest rates on savings (after tax has been deducted).

  • hmonkey
    I have a Virgin Mastercard with a balance of £3000 on it. It was on a 0% balance transfer but this expired.

    I am currently being charged 34.9% !!!!!!!!!!!!

    I have never missed a payment to them. They advertise their rate as being 15.9%.

    Am I being stupid as I don't understand why I'm being charged this ridiculous amount. Each month my payment is only covering the interest which is around £90


    Barclays £9990 Barclaycard £3000

    Tesco £2100 Post Office £1800

    Virgin £2800
  • pelham9
    Do not think that the APR will ever be the annual rate of interest that you pay on any type of credit. The APR hardly ever equates to the actual annual rate (AAR) you will be charged because

    1) the APR must express compulsory charges as well as the AAR

    2) even if there are no compulsory charges the APR rarely expresses the AAR because the APR is an APPROXIMATION of the AAR to one decimal place.

    Say the banks quote an APR of 15.9% they can charge 15.949% without changing the quoted APR and they will do this every time. I call this the APR scam. This doesn't make a lot of difference to the individual borrower e.g a £10000 loan over 5 years at 15.9% costs £7950 in interest but at 15.949% (which is an APR of 15.9%) the interest will be £7974.5 - an extra fiver a year. The banks make millions using this scam and if you challenge them thay will say 'but we have charged you the correct APR and the AAR = APR' which is a lie. Even the OFT will say this!!

    The main difficulty arises when you try to use the APR to calculate whether the interest you have been charged is correct or whether the instalments on a loan are right. If you use the APR your sums will be wrong - not a lot but worryingly so.

    When you understand that the APR is an approximate measure of the cost of borrowing you will realise that it is a useful tool for comparisons but does not have any place in accurately calculatimg the interest that you will actually pay.

    If you look at the article and this thread you will find that most people have fallen for the bank's propganda that APR is the annual rate of interest that you will be charged. Yet another example where the banks are dishonest in lending.

    What does Martin Lewis think!?
    Titch :)
  • lukebarnes
    Hi, I was wondering if anybody knows if the interest rate will drop any further as our RBS rate for our offset mortgage is now @ 4.95% it has dropped twice in the past few months. We would like to fix it at a nice rate but don't know when. Maybe nobody knows but a rough idea would be great, thanks, Luke
  • brekky
    brekky Posts: 8 Forumite

    I've just been reading all the wondrous info in this section but am confused by one of the calculations when comparing flat interest rates against APR, given below:

    "If the three little letters A, P and R don't follow the rate of a personal or car loan… danger! APRs automatically mean the rate is charged on any outstanding debt. Borrow £5,000 over 5 years and by the last year you only pay interest on the amount remaining, say £1,000. At 6% APR the total interest is £800."

    But when I calculate it I keep coming out with a total interest of £900 - am I missing something?

  • targa29
    I love this site and what Martin and his team are acheiving but is anything being done about the outragous interest rates being charged by credit card companies? I used credit cards with relatively low interest to help me finance a business, I know it's not a good way to go about it but cash flow was an issue, the rates were usually about 7% when I took them out, of course the amount borrowed mounted up and up due to minimum payments being made but then the credit card companies started putting up the interest rates, some of these cards now have interest rates of 27 or 28%, I cannot transfer to lower interest cards as when I try I just get a credit limit of say £1500.00 which is useless when the debt on one card alone is £13k! how can they get away with charging such high interest rates and why are the government not looking at it especially when we have such low national rates.
    The over inflated rates are costing me £100's extra every month that could have been used to pay off the cards.
    I feel like I am being ripped off and there is nothing I can do about it (or is there)
    Frustrated from Wimborne!:mad:
  • deborahrourke
    Evening all... I'm dealing with a number of issues with Blemain Finance :mad: I need to know what the law regarding interest charges on a secured loan are. The (very) small print on my agreement reads "This is a variable interest rate loan. There is a discount of 2.00% for twelve months giving a current rate payable of 9.50%. When the discounted period ends, we will charge interest at your annual nominal rate which is currently 11.50% for the remainder of the loan term. This is a monthly rate of 0.96%. Bear with me I'm getting there ;) Though they state that the monthly rate is 0.96 it seems that they charge the actual rate of 0.958333, so no real problems there. Do loan companies have to charge at a daily rate - this makes a big difference. I've done a spreedsheet working out what the interest each month should have been and to be honest Blemain's simply doesn't add up - they have overcharged interest on a very regular basis. They have charged interest on a monthly basis - ie for the first year they charged 0.7916% of the (outstanding) loan amount - figures were spot on for the first few months and then they have begun overcharging. I'm pretty keen with math and spreedsheets so I have added in any extra charges they've made on the correct day and recalculated with charges - still doesn't add up. I'm in the process of detailing the claim and need some help with the law - can they charge a flat monthly rate or do they have to charge daily? Because of rounding this actually makes quite a difference to the amount they have charged. Sorry it's long winded - you'll be glad to know i'm finished now :j Thanks in advance :beer:
  • deborahrourke
    evening again :) There's no need to respond to the long winded message above, I've just found the answer I was looking for. Just discovered something very interesting and highly illegal on my redemption statements from Blemain Finance. I'd love to warn/alert others at least to check there's out but I've got no idea where to post such info... any ideas??:confused:
  • KT21_2
    KT21_2 Posts: 31 Forumite
    evening again :) There's no need to respond to the long winded message above, I've just found the answer I was looking for. Just discovered something very interesting and highly illegal on my redemption statements from Blemain Finance. I'd love to warn/alert others at least to check there's out but I've got no idea where to post such info... any ideas??:confused:

    we also have a loan with Blemain and its the worst thing we have ever done -any advice would be appreciated .
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