Is annual interest rate the same as APR?

Silvafox

I am using a snowball calculator to see how quickly I can pay off a loan by increasing my monthly payment. The calculator asks for the 'standard APR' as a figure. See here: http://www.whatsthecost.com/snowball.aspx

Now, when I look at my loan statement it quotes an 'annual interest rate' of 28.20%.

Is this figure (28.2%) the correct one to be using as the 'standard APR' figure or do I need to convert it into something else?

I am asking as I want my figures to be accurate and not find that I have loads more months to pay than worked out with this calculator!

Thanks in advance for any help.

lawrie7062

The APR is usually different from your interest rate especially when comparing Loans, mortgages, etc.

For comparing mortgages and loans I've always gone with the APR as this is the true cost of borrowing over the term ie it incorporates any charges/fees in setting up the mortgage/loan ie Chelsea currently offer a 3.69% 2 year fixed rate but the actuall APR once set up costs/fees etc are taken into account is 5.5%.

The other one that they are offering is 4.29% with an APR of 5.2%.

Why the higher interest rate but lower APR?

Well because you're paying your fees and charges over the 5 years instead of 2, it's not so much per month, ergo, annually your payments per month are lower.

I hope this helps.

Silvafox

OK, thanks for the info. I understand it to a point...

So - for the purposes of my figures to go into the calculator, and based on the stated 'annual interest rate' figure of 28.2% from my paperwork - am I right in thinking that that is the correct figure for the APR entry on the calculator?

lawrie7062

i'm pretty confident that that will be the correct figure.

Silvafox

lawrie7062 wrote: »

i'm pretty confident that that will be the correct figure.

Yeh, it makes sense. Thanks lawrie7062!

lawrie7062

I'm assuming that you don't have any other set up costs or charges? if not, then that's your figure.

My Credit card is a lofty 29.9% and for calculation purposes, that's the figure i'd use.

Silvafox

There are no other charges to be added and the setup cost of about £150 was added to the balance at the beginning I believe.

People should really use the snowball calculator as it's a brilliant indication of how you can reduce the term on a loan. Just a slight overpayment can make a big difference - which I didn't realise until today.

lawrie7062

Yep, you're spot on re these calculators.

We had a tool at the bank that showed if the customer can pay back £50 extra per month on their mortgage, they'll save x amount.

Sometimes the differences were amazing.

What one are you using out of intrest?

Silvafox

I am using this one:

http://www.whatsthecost.com/snowball.aspx

For example, on an outstanding balance of 5,700, with a minimum payment of about £250, the time to pay it off would be about 32 months (at 28.2%). However, by overpaying by just £50 per month, the loan will be gone in 25 months and over paying by another £250 would get rid of it in just 14 months!

The calculator gives a table with each payment and the interest it attracts if you scroll down the page - and shows you clearly how much the interest is per month.

I would urge anyone to try it if they have loans and are looking to reduce the term length.

lawrie7062

Hey, just used it to work out my CC repayment but first time I tried, the decimal point didn't work for some reason so my total repayment was like £24m or something on a £2450 card balance:eek:!!! I nearly fell off my seat lol.
If I can pay an extra £50, it'll be cleared in just under 2 years:T:j