Bank Loan Interest

MR_G

Had a call from my bank a few weeks back saying do I want to save some money.

Well I will be the first to admit that I have not handled my account as well as I could of so I thought this could be interesting.

Anyway it turns out that im paying a good wack of interest on my over-draft & they thought they could save me money buy offering me a loan at a much inproved rate saving me money.

After thinking about it along with the fact that I have been pre approved I decided to go along with it.

Now I recived the paper work this morning & to my horror I found the following

- The APR rate says 9.6 % even though the interest rate I was told was 8 %

- Insurance for this loan is £ 1,134.00

Still waiting to hear from the financial adviser on this but looking on Martins bit about PPI's the insurance is way to high.

Plus I dont quite get how the loan amount payable has been calculated.

On a fixed sum loan agreement does the calculation work out like this ?

Amount x percentage / 100 = Interest payable

happyformonths

Hi,

Usually the calculation isn't as simple as that because of compound interest. Basically this means that you don't just pay interest on the fixed initial sum of the loan, you pay interest on the interest (which may be calculated monthly, annually or even daily). It's a bit complicated and I'm not very good at explaining it, but I believe that's the reason why the amount they're quoting you isn't the same as the calcuation you describe (I bet their amount is more, eh?).

As for the raised interest rate, yes, I've had that happen to me - when they say you're pre-approved, it means in principle they want to give you a loan, but then they run a credit check after that and THEN they decide on the interest rate. Very bad practice in my opinion, because when you talk to them on the phone they don't make this clear and they make it sound as if you are guaranteed to get this rate.

When it happened to me I just wrote back refusing the loan - they'd offered me a rate *higher* than what I was already paying, duh! Good job I know how to read these documents. It didn't do anything to help the fact that I'd had a credit search done on my file for no good reason, but in the end that doesn't necessarily hurt that much. I was just left back at square one.

Anyway sounds like they've wasted your time... but why not give them a ring and be really nice and see what they can do?

HFM

MR_G

happyformonths wrote: »

Hi,

Usually the calculation isn't as simple as that because of compound interest. Basically this means that you don't just pay interest on the fixed initial sum of the loan, you pay interest on the interest (which may be calculated monthly, annually or even daily). It's a bit complicated and I'm not very good at explaining it, but I believe that's the reason why the amount they're quoting you isn't the same as the calcuation you describe (I bet their amount is more, eh?).

As for the raised interest rate, yes, I've had that happen to me - when they say you're pre-approved, it means in principle they want to give you a loan, but then they run a credit check after that and THEN they decide on the interest rate. Very bad practice in my opinion, because when you talk to them on the phone they don't make this clear and they make it sound as if you are guaranteed to get this rate.

When it happened to me I just wrote back refusing the loan - they'd offered me a rate *higher* than what I was already paying, duh! Good job I know how to read these documents. It didn't do anything to help the fact that I'd had a credit search done on my file for no good reason, but in the end that doesn't necessarily hurt that much. I was just left back at square one.

Anyway sounds like they've wasted your time... but why not give them a ring and be really nice and see what they can do?

HFM

Thanks for your help.

Well I just spoke to the Financial Advisor at the bank & he says that he had been working on premise that the rate available was 8%. His boss apparently put him straight this morning telling him that its actually 9.6%.

Now I think that this is fraud !!!

We spoke a few times on which I was told ohhh yes the rate is 8 %. He tried to baffle me by saying ohh yes " interest rates , have gone up etc etc " now I know they have not gone up in all the time we have been talking so what planet does this guy think im on.

Anyway I have asked him to come back to me with how the interest on 9.6% has been calculated because I could not work it out & niether could he. I have since worked it out & it is correct but i'll let him come back to me.

I think I should ask to speak to the manager because this is sooo wrong. Ok it works out to an extra £4.50 a month but over the time period thats over £100.

Any advice people ?

MR_G

Well I have complained to the banks complaints department & apparently there have been a few complaints about this branch.

Still waiting to hear what the say about it all BUT in the meantime I used
the smartsearch on money supermarket as mentioned by Martin & hey presto I have been approved by Northern Rock @ 6.4 %.

I will peruse this with my Bank because this practice is soooo wrong.

Thanks Martin for this website it’s a god send, Happy for months thanks for the heads up & all posters on this forum keep up the good work.

PoorDave

If the O/D and loan are with the same institution, then there's no sensible reason for them to call and say "do you want to save some money" because that equates to "do you want to lose us some money"

More like "would you like us to bamboozle you until you think you're going to save money, the lie a bit, then give you a product that bears no relation to what was agreed"

The percentage sounds classic sales technique - make the prospective customer think they're getting x when in fact they get y.

And to think the banks wonder why people want to get revenge on them!

Persue this until you get proper answers!

N79

PoorDave, being a cynic there is something in it for a bank to convert an OD to a load, and it certainly is not to "save you money". By moving the OD onto a loan, you can then start using your OD again. The bank is then able to earn interest on the new loan and the OD. More money for them (and even less for you!)

N79