what APR i am paying on my loan?

eagleeye

I took post graduate study loan from the HSBC about two years ago and the interest rate is 1% top of the current bank of england base rate.That means the current interest rate i 'm paying is 6.25% on my post graduate loan.Is it worth to switch to Northern Rock who is charging 5.8%APR.I don't know really what does APR means.In current loan i pay interest only on the loan amount left and their is no early settlement charge.Kindly advice.

Robert_Sterling

I took post graduate study loan from the HSBC about two years ago and the interest rate is 1% top of the current bank of england base rate.That means the current interest rate i 'm paying is 6.25% on my post graduate loan.

How much did you borrow and for how long? Was there an arrangement fee? How many monthly payments have you made?
Are there any early redemption penalties with your HSBC loan.


Is it worth to switch to Northern Rock who is charging 5.8%APR. I don't know really what does APR means. In current loan i pay interest only on the loan amount left and their is no early settlement charge. Kindly advice. [/QUOTE]

It is not possible to answer your question as you have not given sufficient information.

eagleeye

Hello Robert
I borrowed about 9500GBP and their is no early settlement charge on this loan and no arrangement fees at all.I have already paid around 14 installments of 195.28 pounds/month.The total is to pay in 5 years.The current balance is 8310.88.The remaining final amount if any will be taken off/given back in last installment by the bank due to intrst rate changes.

DavidHM

I did exactly what you're suggesting.

I had an outstanding balance on a postgraduate loan with HSBC and was paying £257 per month with 7 1/2 years remaining. I shortened the repayment period to 6 1/2 years and payments would have gone up to £267 at their best rate, but they offered me 6.7% (due presumably to the fact that I was living with parents and my loan was more than my salary in my then new job: although my credit rating is spotless and I have a great postcode for credit risk, in my favour). That put an extra tenner a month on my loan but that still saved me £1,500 over the life of the loan.

In your case, 5.8% APR would translate to £193.60 per month over four years, which would actually be more expensive by about £300 - but given that the rate is variable, you have to take into account the risk of interest changes.

Presuming the total length of the loan is 60 months and you have made 14 payments already, there is no clear answer as to what might be better because it depends on interest movements. I like certainty and would rather not be hit with an unpredictable bill at the end of the loan - but that's a personal preference and I would be paying for the privilege in your circumstances (but for me it was rather more clear cut). As it stands, if there is no balancing charge, switching to Northern Rock would be about £300more expensive for you even if you get their best rate (which is not guaranteed).

In short, I don't think it matters either way really, unless you feel strongly about the risk of interest rate movements. Obviously if you have five years remaining on the loan, then ignore all the arguments for and against and change now!

eagleeye

DavidHM wrote:

I did exactly what you're suggesting.

I had an outstanding balance on a postgraduate loan with HSBC and was paying £257 per month with 7 1/2 years remaining. I shortened the repayment period to 6 1/2 years and payments would have gone up to £267 at their best rate, but they offered me 6.7% (due presumably to the fact that I was living with parents and my loan was more than my salary in my then new job: although my credit rating is spotless and I have a great postcode for credit risk, in my favour). That put an extra tenner a month on my loan but that still saved me £1,500 over the life of the loan.

In your case, 5.8% APR would translate to £193.60 per month over four years, which would actually be more expensive by about £300 - but given that the rate is variable, you have to take into account the risk of interest changes.

Presuming the total length of the loan is 60 months and you have made 14 payments already, there is no clear answer as to what might be better because it depends on interest movements. I like certainty and would rather not be hit with an unpredictable bill at the end of the loan - but that's a personal preference and I would be paying for the privilege in your circumstances (but for me it was rather more clear cut). As it stands, if there is no balancing charge, switching to Northern Rock would be about £300more expensive for you even if you get their best rate (which is not guaranteed).

In short, I don't think it matters either way really, unless you feel strongly about the risk of interest rate movements. Obviously if you have five years remaining on the loan, then ignore all the arguments for and against and change now!

I have decided not to change as the amount of risk is higher while switching to NRock.In HSBC i dont pay any insurance and no other extra charges.Hopefully by the end of this year i would be able to pay all.