Interest rates greater than expected?

Firely

Hello,

I took out a Natwest Personal Loan of £8000 with a total repayable amount of £9642.96 at 20.3 APR.

My monthly interest should be around £68 but it seems to be double this and getting larger despite regular repayments.

For instance, last month I payed off my £400~ and had interest of £114~. This month I have payed off £400~ again but with an interest of £129. Where are these extra 'charges' coming from? I have read through the loan agreement and am I right in saying additional interest is placed on top of the total repayable amount and this is what I am experiencing?

I still have more than 20 months of repayments, surely since my interest is getting larger each month I will eventually be paying off £400 and gaining over £200 in interest?

Is it also right to say that even after my 24 months of repayments are up I will still continue to pay off interest?

I am in my first three months of repayments.

Any help appreciated explaining simply what is going on. Would rather ask here since it will be a whole day before I have time to sit down on the phone with bank.

Thank you.

bigadaj

You need to check with the bank. At that apr then the total amount you have to repay would be over one year, if it is over two years then there would be another £1600 interest to pay, so your repYment amount would be £100 more than what you are currently paying. You need to check with the bank.

jonesMUFCforever

Where did you get your figures from?
I calculate that £8k at 20.3% interest would be approx £135 for first month.

Rest can be explained by different number of days in month and your payment date been delayed by weekends and bank holidays. Sometimes you gain other months you lose.

I think the bank calculates interest daily and applies it monthly to your loan.
As you have not paid off much of the original capital now your interest charge is higher than it will be towards the end of the loan.

From what you have posted the figures that you quote for interest in month 2 and 3 make sense to me.

CLAPTON

elementry arithmetic say that the 1st months interest will be

£8,000 x 20.3% / 12 = £135

in each month thereafter the interest will fall as the capital owed will fall

lifebeginstoday

Are you repaying capital or shortening the term, how you making the overpayments?

Figures do seem a bit suspect though:)

antrobus

Firely wrote: »

...For instance, last month I payed off my £400~ and had interest of £114~. This month I have payed off £400~ again but with an interest of £129. Where are these extra 'charges' coming from? ...

Where are these figures coming from?

Firely wrote: »

...I have read through the loan agreement and am I right in saying additional interest is placed on top of the total repayable amount and this is what I am experiencing? ...

If your loan agreement states a total repayable amount of £9,642.96, then that's what you'll be repaying, so long as you make all the repayments on time.

somethingcorporate

antrobus wrote: »

If your loan agreement states a total repayable amount of £9,642.96, then that's what you'll be repaying, so long as you make all the repayments on time.

Unless there has been a miscalculation somewhere...it's not like we haven't seen this on the board before. And also, it's not like the banks to be infallible!

opinions4u

Interest charged is based on your balance and the number of days in the accounting period.

Some months are longer than others.

theoretica

That all looks right for a loan term of 2 years. The first full month about £135 of your £400 payment is interest. However, the last month only about £7 of the payment will be interest - the average is about £68 as you say, but it isn't evenly spread throughout the loan term. At the start you owe them more money so they charge you more interest. At the end you owe less money so they charge less interest and the loan is paid off faster.