Interest on business loan

Humdinger1

Hello everyone - after several months of increasingly fascinated, even obsessed, lurking, I've joined. I can't tell you how inspired I am by the stories, and (not the first time this has been said) it makes me see that I am not alone. Reading the boards, I realised that even small regular over-payments add up to a huge difference and after I'd made my first over-payment on a business loan this week, had to join just to say thanks for helping me get to this point.

So, here is my first question. As part of getting myself out of a huge hole, the bank agreed to increase my business overdraft and turn it into a loan. Apart from that, I owed 80k (yup,you read that right!) in July 2013 plus 20k on personal credit cards but have managed to pay all that off. Now, the loan of 25k has reduced down to 18.5k, inc an over-payment of £500 I made on Thurs. The int rate is 10.99% and the original term was 10 years; the set payments are £329.50 per month.The bank tells me that that the interest differs each month depending on the no of days in the month - but when I look at the no of days in a month and the interest applied, it makes no sense as there would only be 3 different interest amounts - 30 days, 31 days and 28 or 29 days for Feb whereas they vary wildly. Can't paste a table in (I guess as I'm a newbie?) but the daily interest amount ranges from £5.62 to £6.65.

I will be calling the bank to ask about this again but would really appreciate it if anyone could throw any light on this so that I go into the discussion with some more insight than I currently have. When I asked them to help me work out how much more quickly I'd pay it off with over-payments, they couldn't find their ready reckoner! Shows me I'm doing a good thing then...I have since worked out that I will reduce the term to something between 24 and 30 months and the interest saved will be stonking.

Also, I've seen numerous references to the snowball calculator but can't find it. Can anyone please point me in the right direction? Thanks very much

Humdinger

ViolaLass

The amount of interest you pay per month will depend on the number of days in that month AND the amount of capital still owed. The latter will reduce over time.

molerat

http://www.whatsthecost.com/snowball.aspx

The interest will vary as it is based on the daily balance. Once you have made a payment the balance is reduced, 2 consecutive 31 day months will have different interest amounts. Also factor in weekends and bank holidays delaying the payment date can lead to a couple of days extra interest on that payment amount.

Humdinger1

Violalass, Molerat

Thanks very much for your very quick replies. Of course you are right, I see it now. Happy hours ahead playing with the snowball calculator!

Humdinger