Online banking shows higher loan balance

novicemoneysaver

Hi I'm hoping somebody can clear my confusion, my girlfriend took out an £11000 loan out in June 2010 over 7 years, her monthly loan repayment is £214.01 per month, by my calculations this works out at £125.36 capital repayment and £88.65 interest repayment, so she's at the half way point of the loan having made 42 payments totaling £8988.42, so if she continued in the same fashion for the second 42 payments would pay back in total £17976.84 based on 16.4% APR - (don't even get me started on this one :shocked:) this I can assure you will not be happening , but here lies my confusion, online banking shows a loan balance of £6933.05 - this figure does not include interest, as this is added on the day the payment goes out on DD. my expectation of a settlement figure of £5265.12 plus 58 days interest approx £177.30
totaling, £5442.42 does not compute with the online banking total now doing the maths, if continuing to the end of the loan the capital owed is £5265.12 and the interest payable is £3723.30 where on earth does the figure £6933.05 come from as we are at the halfway point of the loan how can there be £1667.93 capital owing without interest.

sorry for the long first post but my head hurts

redpete

Are you assuming the same proportion of capital to interest on the monthly payments throughout the loan? This is not correct, the amount of interest is high at the beginning of the loan and almost nothing at the end as the amount of capital outstanding drops each month.

brendon

Where do you get an interest figure of 3,723.30? I get £3,000 with the assumption that she has this balance for 3.5 years at 16.4% APR -- with repayments, you will pay about half of this (£1,500). £5300 + £1500 roughly equals £6,800.

novicemoneysaver

My figures are derived from the total amount payable on the loan agreement, loan amount £11000, monthly repayment £214.01, number of loan repayments 84 total amount payable £17976.84 APR 16.4%
total interest for credit £6976.84 annual interest rate 15.28%

so based on the fact she has paid 42 payments of £214.01 = £898842
so if she continued the loan to the end she would pay a further 42 payments at £214.01 making total amount payable £17976.84 - based on Decembers payment loan outstanding was £7058.41 - new balance is £6933.05 meaning capital reduction of £125.36 leaving interest amount £88.65 times the capital by 42 = £5265.12 and the interest times by 42 = £3723.30 added together and times by 2 =£17976.84

antrobus

novicemoneysaver wrote: »

.... where on earth does the figure £6933.05 come from as we are at the halfway point of the loan ...

If you are at the halfway point of the loan, how on earth can you expect the settlement figure to be less than half the value of the initial loan?

By my calculations (rough-and-ready sum-of-digits) GF has paid £9k to date, of which £5k is interest, £4k repayment of capital, so there should be £7k outstanding on the loan. Bank are quoting a loan balance of £6,933.05, so that looks about right to me.

novicemoneysaver

thanks for clarifying it all for me, that makes much more sense.

redpete

Using 15.28% instead of 16.4% the bank's figures make sense. I make the balance on the loan after 42 weeks to be £6927, interest paid to date £5027, interest that will be paid over the rest of the loan if allowed to continue to the end of 7 years would be another £2174.

Apples2

Tap the figures into here to see what is really going on with the Capital/Interest share of repayments

http://www.theguardian.com/money/loan-repayment-calculator-interest-rates

That's a horrific loan by the way.