Explain my interest charges, please.

Ceniza

I have a loan with Lloyds TSB, and have checked my statement and my fixed interest seems to fluctuate. Some months I will pay more than previous months, despite my balance being considerably lower. Could someone explain to me why this is? At first I thought it could be because interest is calculated daily, and some months have more days than others, but then, even 1 day extra in the month, shouldn’t make the payment higher when I’m making repayments of £400 a month.

Could anyone shed some light on the possible reason? I’m sure there’s a simple explanation.

Thanks.

telboyo

What are the figures?loan amount period interest rate

Ceniza

It was an annual statement: £19,137.26 opening balance and 13.62% rate. Original loan over 84 months.

jonesMUFCforever

Some months have more days than others - sometimes a repayment date falls on a weekend or Bank holiday - swings and roundabouts it will even itself out over the course of the loan.

Ceniza

jonesMUFCforever wrote: »

Some months have more days than others - sometimes a repayment date falls on a weekend or Bank holiday - swings and roundabouts it will even itself out over the course of the loan.

Thanks for the reply.

My monthly repayments are almost £400. Would you still expect that I could have higher interest charges than previous months?

telboyo

Look carefully at the statement- I sometimes get this effect on my monthly mortgage stateemnt depending on the days repayments are taken and interest is charged there will sometimes be 1 interest payment and no repayment due to the end of the month falling over the weekend or bank holiday. The next month the situation is reversed

CLAPTON

why not give the actual figures... makes it a lot easier but if you owe 19k at 13.62% apr then thats about £7.14 a day in interest
so one could easily explain variations of say between 25 day and 35 day per month (28 -31 real days, weekends, bank holidays etc ) so up to £70 would be expected

opinions4u

Ceniza wrote: »

Thanks for the reply.

My monthly repayments are almost £400. Would you still expect that I could have higher interest charges than previous months?

£19,000 at 13.62% a year = £7.09 a day in interest. In a 28 day month that would be £198.52.

Your debt would fall to £18,701.48. That would mean £6.98 a day in the following month. If it's a 31 day month you would pay £216.38.

So although the figures I've used are generic estimates, and different banks have different charging periods, I would certainly expect there to be more interest charged in a 31 day month than a 28 day month in the first few years of such a long loan - even if the capital balance has fallen.