Loan Repayments

gsa_2

Hi all,

I would be most grateful if anyone could help me figure out whether my current loan repayments are correct. I am hopeless when it comes to interest rates etc.

I took out a Natwest Professional Trainee Loan in 2010 and completed the Graduate Diploma in Law and the Legal Practice Course. The amount taken out was £25,000 (£9000 for the GDL and £16000 in the second year for the LPC) to be rapid over 105 months (repayment commenced 16 months from first draw). The stated APR was 8.89%.

I am currently repaying approximately £430 per month.

When I enter the above figures on repayment calculators that are available on the web, I am consistently being informed that my re-payments should be around £330 per month.

If the calculators are correct, are there any reasons why I may be paying so much more?

Thank you in advance :beer:

jamesd

Interest would continue to accrue until the first payment. That increases the amount that has to be repaid over the 105 payments.

Just when do repayments commence:

1. 16 months after first drawdown of first loan
2. 16 months after first drawdown of second loan
3. 16 months after first drawdown of each loan individually
4. Something else.

If it's case 2 the payment looks about right.

jonesMUFCforever

You owed more than £25k due to interest accruing before you made the first and subsequent repayments.

gsa_2

I believe repayments commenced 16 months after first drawdown of the second loan.

Thank you both for clarifying the issue for me.

gsa_2

jonesMUFCforever wrote: »

You owed more than £25k due to interest accruing before you made the first and subsequent repayments.

As stated, I owed more than £25,000. Is this due to the interest accruing on the initial £9000 during the first year? Should this be so high? I'm playing around with numbers on the repayment calculator, and it suggests with repayments of approx £430 the total amount borrowed would be around £31,250.

I think I may just be confusing myself!

jamesd

For the first loan the balance owed would increase to £10,978 over the 28 months until first repayment. For the second loan the balance would increase to £17,924. Total due £28,902. That would produce a repayment of £392 a month over 105 months.

A balance of £31,650 would produce a payment of £430 a month over 105 months.

If repayment was due to start 16 months after the end of the year of the second loan there would be 40 months of interest on the fist part, increasing that to £11,954. 28 months for second loan, new balance £19,517. Total due £31,471. that would produce a monthly payment of £427.

Best to ask NatWest for more detailed calculations and the exact terms of the loan.

gsa_2

Thank you James. I will request full terms and detailed calculations from Natwest and post again once they are to hand, if that's ok

gsa_2

I've managed to locate the 2 agreements. I have posted the essentials of both below. Once again, I am unable to reconcile the numbers with what is displayed on the online loan calculators. As suggested in previous posts, this may be because they do not take into account the interest which is accrued, but I would be grateful if someone could confirm that everything is in order.

Agreement 1:

Amount: £9000
Term: 120 months
Total amount payable: £14,237.92
Interest: £5237.92
APR: 8.89%
Repayment: 16 months after first drawn. 104 payments of £135.60, final payment of £135.52.

Agreement 2:

Amount: £25,800 (11,000 - course fee, 14,800 repayment of existing loan and living expenses)
Term: 108 months from date first drawn
Total amount payable: £39,500.99
Interest: £13,700.99
APR: 8.9%
Repayment: 17 months after term begins. 91 payments of £429.35, final payment £430.14

jamesd

Interest might only be payable for money that has been drawn but I'll assume that the whole of each loan is drawn at the start for simplicity.

For the first loan the 16 month delay would increase the amount owed to £10,082.30. A loan calculator shows that the monthly payment for that over 104 payments would be £138. Total amount paid £14,308 of which £4,226 would be interest while being repaid and £1,082.31 interest before the first payment, total interest £5,308.31. These numbers are a little higher than those from NW because I'm using 16 full months delay plus then a normal loan with repayment starting after one more month, which adds one more month of paying interest than you had and increase the amounts a little. So the numbers given for the first loan seem to be what I expect.

The second loan isn't an independent loan. Instead it was used for early settlement of the first loan, then replaced the whole first loan. One reason why the payments are higher than you got for a loan calculator is because the repayments are over 91 months, not the 106 months you originally gave - shorter period for the repayments, so higher payments. One thing to check is that £14,800 is the correct amount for repaying the first loan. There is an unknown amount for "living expenses" included. I don't know what part was repayment and what part was living expenses so I can't check that it is correct.

Using the loan calculator again, £28,906.14 owed after 16 months of no payments. Loan calculator shows that to repay that at 8.9% over 91 months has a monthly repayment of £433.

I'm satisfied that the calculations by NW are probably correct, assuming that the opening £14,800 for repayment and living expenses is correct. I don't know how much of that was the repayment of the first loan so I can't use a loan calculator to get an amortisation table showing how much was owed at the time and check it.

gsa_2

Thank you so much James for the detailed reply. I am now confident that everything is in order.

redpete

Anyone else surprised that someone studying for law doesn't understand fairly simple loan interest?