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How is APR on a loan calculated?

Milky_Mocha
Posts: 1,066 Forumite


in Loans
Hi
I've been approved in principle for a £15,000 loan over 48 months at 6.97%. I'm trying to figure out how much interest I'd be paying each year. Is it just a case of that percentage times the 15k? That would equate to £1,045 each year in interest. I'm thinking that maybe the calculation is not that simple?? Its an unsecured personal loan.
I'm considering the alternative of a balance transfer of 15k to my current account. This incurs a one off fee of £525 and according to my credit card company I have a 0% interest rate till June 2013. If this works out more cost effective I could pay off aproximately half by June and then pay off the balance with savings or work bonus.
Please advise or give any opinions.
Thanks
I've been approved in principle for a £15,000 loan over 48 months at 6.97%. I'm trying to figure out how much interest I'd be paying each year. Is it just a case of that percentage times the 15k? That would equate to £1,045 each year in interest. I'm thinking that maybe the calculation is not that simple?? Its an unsecured personal loan.
I'm considering the alternative of a balance transfer of 15k to my current account. This incurs a one off fee of £525 and according to my credit card company I have a 0% interest rate till June 2013. If this works out more cost effective I could pay off aproximately half by June and then pay off the balance with savings or work bonus.
Please advise or give any opinions.
Thanks
The reason people don't move right down inside the carriage is that there's nothing to hold onto when you're in the middle.
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Comments
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Has the lender not given you a break down of payments?0
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Hi
It was only approved in principle and it was over the phone with freedom finance. At that point I thought the rate Was high so I told them I wasn't interested. I called back and they said they would have to take me through the application again. As its a general query I was hoping to understand the options before going through the whole process again with another search etc. However if there is no standard way of calculating this interest and payment can vary even if the interest is a given rate then I guess id have to wait till Monday, phone them up and go through the whole process again.The reason people don't move right down inside the carriage is that there's nothing to hold onto when you're in the middle.0 -
It's not really necesssary to know how they work out the APR (although if you search the BBA website you'll be able to find out). What's more important is the cost over your chosen repayment term.
For example, according to http://www.whatsthecost.com/loan.aspx you'll be paying around £930 interest in the first year. Compare this with the £525 SBT fee on your credit card and you'll see it's about twice as much as the credit card cost.
Hardly surprising really, since the SBT cost is 3.5% (525/15000*100) and the loan cost is near enough 7% APR.0 -
6.79% APR is a fantastically good rate ... if fact too good to be true
are you absolutely sure?
15,000 over 48 months at 6.79%APR would be monthly payments of about 350-360
the interest is based on the decreasing sum so obviously you pay a lot more interest in the first year than the last years
first year you would pay approx £9100 -
As above, 6.97 is a fantastic rate. As it was a loan in principal, expect that rate to rise once a thorough credit check has been done. The rate quoted is likely their representative rate but if you're lucky enough to get 6.97% APR then the interest breakdown is as follows;
Year 1, 939.24
Year 2, 696.80
Year 3, 436.91
Year 4, 158.300 -
Alarm bells should be ringing with that rate...it sounds too good..It is nice to see the value of your house going up'' Why ?
Unless you are planning to sell up and not live anywhere, I can;t see the advantage.
If you are planning to upsize the new house will cost more.
If you are planning to downsize your new house will cost more than it should
If you are trying to buy your first house its almost impossible.0 -
Milky_Mocha wrote: »At that point I thought the rate Was highbefore going through the whole process again with another search0
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Thanks for all replies. The rate was 6.97 and the lady on the phone said it was a fantastic rate and the reason I thought it was high was because the last time I took out a loan I paid just under 6% but that was 4 years ago. Also my credit rating is 999 and I have no debts apart from my mortgage and I clear my cc balance every month.
It would be annoying if after taking me through that long application process and coming up with that rate, they turn around to quote something higher. I think I'll go the credit card route.
Thanks so much.The reason people don't move right down inside the carriage is that there's nothing to hold onto when you're in the middle.0 -
Milky_Mocha wrote: »Also my credit rating is 999It would be annoying if after taking me through that long application process and coming up with that rate, they turn around to quote something higher.I think I'll go the credit card route.0
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