Followed advice from website but think i have been stung...

blondends

Hi,

I followed the advice of this website when choosing a loan and chose the Cahoot flexible loan. I have taken out a loan of £3000 and have been following my repayments and can't quite work out why i have paid £67 p/m for 6 months and still have only paid £145 off the loan. Now i understand that i have to pay interest but not between £30 and £40 p/m. So i have had a look through all the gumph on the site and have realised that i am paying 13.56% APR on the loan. What i need to know is....

1. IS 13.56% a high APR for a flexible loan of £3000?

2. How do i work out what i should be paying a month in interest is the APR is 13.56%?

3. Why do they advertise loans at 6.9% and then charge 13.56%?

4. I'll change this question: What would the total amount payed to Cahoot be if i was paying the loan back over 60 mnths with an APR of 13.56%?

5. What should i do?

Thanks in advance for any adivce given - just to let you know this is the first time i have every taken out a loan or anything like it. Ahrrg!!!

Cheers,

Chris

davidcampbell

ill try to answer your questions chris since im first here ..........

1. IS 13.56% a high APR for a flexible loan of £3000?

not especially. most loans of less than £5k tend to fall into this kind of interest range. anything above 5k attracts rates of maybe 9% reducing to your 6% ish for larger amounts (upwards of £10k)

(although obviously the tiers and rates are variable between companies)

2. How do i work out what i should be paying a month in interest is the APR is 13.56%?

not sure. how long is the loan term?

the early payments you make pay off mostly interest and little capital, while later payments pay a lot of capital but little interest.

someone else on here can and will be able to explain that better than i can though.

3. Why do they advertise loans at 6.9% and then charge 13.56%?

6.9% will be standard rate but your actual rate is dependent on your credit assesment




as to what you should do ill leave that to one of the experts but i guess if your credit history allows it maybe look for a lower apr.

hth
DC

fatboyonadiet

Maybe ask Cahoot for a detailed explanation and breakdown, and welcome to MSE!!!

Woby_Tide

blondends wrote:

1. IS 13.56% a high APR for a flexible loan of £3000?

2. How do i work out what i should be paying a month in interest is the APR is 13.56%?

3. Why do they advertise loans at 6.9% and then charge 13.56%?

4. What would be the final paymet based on a APR of 13.56%?

5. What should i do?

1. As other poster says, the lower the borrowing the higher the interest rate tens to be to cover admin and make the lender some profit!

2. Rough calculation but approx monthly interest is 1.062% so on £3k it's £31.87, but minimum repayment is 1.75% i.e c.£52

3. The advertised rates are 'typical' rates i.e. they have to be offered to a set percentage of applicants as laid down by FSA/ASA(?). ALways check the rate you are being offered, the rates are dependent on numerous circumstances.

4. It's a flexible loan, there is no 'final payment' as such, you choose how long you keep the loan for depending on what payments you make.

5. Consider your options, maybe apply for another loan or CC with lower interest rate, but depends how much of the flexible loans features you require

blondends

Thanks all for replying to my question - and quickly at that!!!

I have received an email back from Cahoot after i asked why my APR was so high, they said...

'I can confirm that the interest rate you are offered is based upon your credit scoring at the time of application.

All banks advertise typical rates which a certain proportion of their customers will receive, but not all customers can be offered this rate.

When you apply online we confirm the rate we can offer you. This rate is also stated on the credit agreement which you sign.

If you are unhappy with you current rate you can send in a secure message requesting that we review the rate. Our underwriting team will consider your request and see if they can offer you a lower rate. Please note that there is no guarantee that you appeal will be successful.'

So i think that i will be contacting them to see if they drop my APR.

I will leave you with another question:

Q. Are Cahoot obliged to provide charts and graphs showing me all this information?

Thanks again,

Chris

MSE_Martin

Yes you should've been told by cahoot in big and bold that you weren't given the advertised rate. In the article i do note that cahoot rate isn't a fixed but a typical rate, and its something i try and explain in detail. It's very important to always check the rate that you're getting. I have to say i think 13% is heavy. You may be better seeing if you can get the rate cheaper elsewhere - Nationwide has good rates, not flexible for lower amount loans and you could then use that money to pay off some or all of the Cahoot loan if accepted

martin

blondends

Again - Thanks for the replies, i did realise that i had made the mistake and i didn't mean to imply that i was missinformed by this website.

I have sent off a couple af loan requests to cover the amount borrowed from Cahoot and have also requested that Cahoot revise my APR amount (suggested in their email to me).

I have had a look through the documentation Cahoot sent to me and have found the section called 'Interest Rates and APRs' which i don't really understand...

'The interest rate for withdrawals and balance transfers is a monthly rate of 1.1303%.

The APR for withdrawals and balance transfers is 14.4% (variable).

The APR is calculated on an assumed credit limit of £100.00'

Could someone explain what exactly that means - i.e. how does 1.1303% every month = 14.4% APR?? I just can't get my head around this.

note: this information was not quite so big and bold as i thought it might be. To me it seemed hidden amongst a lot of text.

Cheers again,

Chris

Rafter

Chris,

If you borrow say £100 in one months time you will pay interest of £1.1303 on it.

In the second month you will pay interest on £101.1303 at 1.1303% and so on.

If you have access to a spreadsheet and input ((1+1.1303%)^12)-1 you will get an answer of 14.4% APR.

Until recently, they had to offer 50% of applicants the 'typical' apr. The rules have been tightened up so they now have to offer 66% of applicants the 'typical' rate.

If your credit record is ok and your earnings are improving, you should be able to get a better rate, or even use a credit card shuffle to reduce your interest bill further.

Good luck.

R.