?ACTUARIAL? Loan Calculator

westie666

Does anyone out there have some kind of formula for working out the final settlement on a loan.

I phoned the A&L yesterday, and they gave me a figure about 1500 more than I had worked out.:mad: They say they dont use rule of 78 anymore. They now use acturial calculation.

As I have asked, does anyone have some kind of calculator to work this out???

Rgds
W666

garry_s

ask them!!!! RBS tried Rule of 78 with me but couldn't tell me what it was - I went on the internet and found that it was frowned upon by the OFT! They must tell you - don't be fobbed off

Rafter

Westie,

The actuarial method is actually the fairer one as you only pay for interest accrued on your loan, rather than the rule of 78 which ensures more of the interest gets applied up front, therefore reducing your refund.

You need to take your original loan and then work out from your loan agreement what the interest rate per month is, knock off the monthly payment to calculate the balance at the end of the month and then repeat the whole calculation for month 2 etc.

Alternatively use the 'FV' function in Excel as follows

=FV(rate per month (eg 1%),number of payments you have made,your monthly payment,original loan amount,0)

If your loan was 10,000 and your interest was 1% per month and you were paying 500 per month for the last 12 months the formulae would be as follows:

=FV(1%,12,500,-10000,0)

Answer £4,927 outstanding.

If A&L are giving you something significantly different, did you take out payment protection with the loan, in which case you are at the mercy of their refund policy and what type of premium it was.

Hope that answers your question.

R.

mountainofdebt

In fairness the rule of 78 may still apply provided the loan was taken out before 31/05/05......after that date it can't apply.

Is this the case OP?