What's an unflat loan?

koloko

deleted deleted deleted

iolanthe07

Car dealerships often quote flat rates - they don't seem to have to abide by the rules on this one. If you double the flat rate you will get a fair indication of the APR. So a flat rate of 9% would equate to around 18% APR, give or take. They will hide the APR somewhere in the small print.

Tixy

I believe there is only a legal obligation to show the APR on the loan agreement not at any point before that and flat rates are frequently used in the car industry.
An unflat loan is one where the interest charged decreases each year as you pay back the loan capital, on an flat loan you are charged interest on the original amount each year (even though a chunk is repaid each year).

The loan you were quoted for has an APR of just over 30%.

iolanthe07

The loan you were quoted for has an APR of just over 30%.

Are you sure, Tixy? I thought you doubled the flat rate to get a rough APR - in this case around 18%. How do you get to 30%?

Tixy

Well its funny I'm sure I've read about it being roughly double, but I think that must only work at lower rates (maybe?).

I just fed £6k, and 36months into a loan calculator and to end up with repayments of £250 a month the APR needs to be around 32%.

Apples2

Whichever way you look at it, this car salesman waffle is there to deceive you.

It appears that a best case incurs an APR of 18% with a worse case 30%+

If you can't do better than that with a bank - You shouldn't be borrowing money, you can't afford it.

CLAPTON

a flat rate is worked out like this

total interest over the period / (loan amount x period in years)
this is the 'interest rate' leaving out that fact that each month you pay some of the capital back


i.e. 3000/(6000 x 3) so the flat rate is 16.67%

the APR is about 33%

iolanthe07

i.e. 3000/(6000 x 3) so the flat rate is 16.67%

the APR is about 33%

Almost exactly double, then, as I stated in post no 2. It looks as if the dealer has quoted the wrong flat rate.

~Brock~

£6000 x 9% flat pa = £540 interest for each year the finance agreement is set up for.

Therefore the total interest charge on a £6000 loan over 36 months should be £1620, and the monthly payment would be approx £212 per month.

The only thing which may affect this is any administration fees that also usually appear on such agreements.

Both the APR and the actual interest rate used to calculate the repayments (i.e. the flat rate) should appear on the finance agreements and also the SECCI (pre-contract explanation sheet).

CLAPTON

~Brock~ wrote: »

£6000 x 9% flat pa = £540 interest for each year the finance agreement is set up for.

Therefore the total interest charge on a £6000 loan over 36 months should be £1620, and the monthly payment would be approx £212 per month.

The only thing which may affect this is any administration fees that also usually appear on such agreements.

Both the APR and the actual interest rate used to calculate the repayments (i.e. the flat rate) should appear on the finance agreements and also the SECCI (pre-contract explanation sheet).

I have never seen a 'flat rate' appear on a credit agreement.

~Brock~

CLAPTON wrote: »

I have never seen a 'flat rate' appear on a credit agreement.

The Consumer Credit (Agreement) Regulations 2004 - effective from 31/5/2005 - introduced the requirement to not only show the APR but also any other rate used to calculate the total interest charges, bearing in mind that the APR is an 'after the event' calculation that takes into account ALL charges including fees etc.

The regulations do not go into any further detail as to specify the actual format or tolerances surrounding this rate, and where a lender has used a 'flat rate per annum' calcaultion then this can be shown.

In the days of challenging the enforcibility of everything on credit agreements this was challenged by some of the more eagle eyed ambulance chasers in court. They lost. :T