Understanding APR 6.95%

rentose

I got a Loan with following criteria:
Loan Amount Cash loan of £8000.00 for Personal Expenditure
Monthly Repayments 60 payments of £157.35
Total Amount Payable £9441.00
(this includes Total Charge for Credit (Interest) of £1441.00)
APR 6.9%
Length of Loan Term 60 months starting from date of draw down
Annual Rate of Interest 6.72% a year - Fixed
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So by my (simple) understanding, I'm paying 1441 over the term of the loan of 5 years, so interest of 1441/5 = 288.20 per year.
£288.20 of £8000 seems to me to be less than 6.9% or 6.72% per year, but probably I dont understand the concept of APR.
Do the figures above make sense?

DannyBo

Hiya! I'll try to explain how I think it works:

You start off with £8000 the interest is calculated at 6.72% which in the first year may be around £600

As the debt becomes smaller, the interest also becomes less.

So it's an average over the term.

I think that sounds about right but dont quote me !

I do know that is the general idea, i may just not be able to explain it as well as others but im sure somebody helpful will be along real soon

rentose

that seems about right, thanks for the reply. I was happy to be granted a loan at what I see as a low interest rate, just wanted to be sure I wasn't missing anything, thanks

DannyBo

No problem... I meant to say the interest rate is not the average but the interest is. So in the final year could be £50/mnth but i guess you got the general idea

bankscausepain

Probably one of the best rates available in today's market.

rentose

yes it was most unexpected, especially after being given the run around by RBS. They called me into my branch 6 months ago with the promise of a similar rate (which they said was 'indicative'), then when the application actually went through the system it threw back a figure of 18% a year. The mad woman actually sat there trying to convince me to consolidate my existing 12% loan into this new 18% loan because although it was higher at least it would be simpler because it was "one single payment a month". So when I got a similar call 2 weeks ago from RBS with similar promises of 8% I actually gave the guy on the end of the phone a bollocking for promising these 'teaser' rates. Last Saturday while doing online banking the system popped an online application message for a loan. For a laugh I filled it out and to my surprise it was granted. I know my circumstances have improved a little since 6 months ago but its still confusing.

Moneymash

Never look a gift horse in the mouth, you must be doing something right!