Should a fixed sum loan be going up?

james5763

Hi all, I took a loan out last year for the sum of £23,000
It’s a personal fixed sim loan with Yorkshire bank
It’s for 48 months
Rate of interest applied to the credit 4.087% per annum fixed
APR 7.9%

The monthly payment is £557.49
And it says the total amount I will have to pay is £26,759.30 and under this it says “ this means the amount you have borrowed plus interest and other costs”

Now I’ve recently noticed around £110 a month being added onto the loan

I contacted the back today to they said this is correct and they add on interest each month... is this correct?

My monthly payment equals to £26,759.30 so I don’t understand why they are adding more on each month?
Never missed a payment or taken holiday time from it

Any help I’d really appreciate
Thanks James

forgotmyname

How are they adding more if your total to pay is the same?

They are adding interest onto your initial loan. Pay it off early and save interest. Or pay what you agreed and the figures you have will be correct.

Nearlyold

What you are seeing is perfectly normal and is how all loans work.

Your monthly payment takes account of the interest that will be charged over the whole term of the loan, so it covers both the interest and the amount you borrowed.

They add the interest each month to the balance (the interest is calculated on the total amount still owed in that month). Your monthly payment then reduces the amount you owe by the difference between your payment and the interest for that month. Each month the interest added will be slightly less (because its charged on the outstanding balance) you'll notice on your statement the balance reduces each month - eventually the balance owing will be nil by which time you will have paid the agreed total of £26,759.30 and fully repaid the loan.

Google Guardian Loan Calculator and put your figures in, you'll then see how it all works

PixelPound

You took a loan out last year for the sum of £23,000 and the total amount I will have to pay is £26,759.30 - how do you think the extra £3,759.30 is added? All at the beginning!!! If any of it was fees,that gets added straight away, the interest gets added monthly and based on how much is left. If you make payments on time, nothing more nothing less, it will work as agreed. So its not going up, just they have not added all the interest yet.

As interest is calculated monthly, then if you make over payments, then the sum owed is smaller and you end up paying less interest over the term

james5763

I understand the loan needs the interest adding and from what was under the impression the interest is included in the £557.49 monthly payments

To help I took a picture on the remained loan amount on the 9th of September ( 4 days after September payment) and the balance was £16,974.96
Then I look again yesterday and its jumped up to £17,082.04

I could understand if I was only paying back the loan without interest then they added it on the balance each month but 48 months at £557.49 equals my loan total so it doesn't explain the money added each month just like above

[Deleted User]

The money added is the interest.

Don't worry about it. It's perfectly normal.

Caz3121

james5763 wrote: »

I understand the loan needs the interest adding and from what was under the impression the interest is included in the £557.49 monthly payments

To help I took a picture on the remained loan amount on the 9th of September ( 4 days after September payment) and the balance was £16,974.96
Then I look again yesterday and its jumped up to £17,082.04

I could understand if I was only paying back the loan without interest then they added it on the balance each month but 48 months at £557.49 equals my loan total so it doesn't explain the money added each month just like above

you have misunderstood the numbers
The £16k-£17k will continue to have interest applied until it is paid off
Multiply the remaining months by £557.49 and you will see a difference of £2k+ which is the interest and is added daily

foxy-stoat

james5763 wrote: »

I understand the loan needs the interest adding and from what was under the impression the interest is included in the £557.49 monthly payments

To help I took a picture on the remained loan amount on the 9th of September ( 4 days after September payment) and the balance was £16,974.96
Then I look again yesterday and its jumped up to £17,082.04

I could understand if I was only paying back the loan without interest then they added it on the balance each month but 48 months at £557.49 equals my loan total so it doesn't explain the money added each month just like above

The monthly amount hasnt changed has it and the interest is included in the payment.

Its all normal.

Haztay35

My son took out a similar loan with Yorkshire Bank and has just paid a settlement figure. * the monthly figure with how many months he had left was equal to the amount he was told to repay. On the agreement letter it says twice that he should be entitled to a rebate (he paid it 16 months early) but they have told him over the phone that he wasn't entitled to it.
I told him to put a complaint in to the bank, but wondered if this is a common thing.

foxy-stoat

Haztay35 wrote: »

My son took out a similar loan with Yorkshire Bank and has just paid a settlement figure. * the monthly figure with how many months he had left was equal to the amount he was told to repay. On the agreement letter it says twice that he should be entitled to a rebate (he paid it 16 months early) but they have told him over the phone that he wasn't entitled to it.
I told him to put a complaint in to the bank, but wondered if this is a common thing.

He is not entitled to a rebate on the interest already paid - why would he? The "rebate" was for the interest that he has yet to pay as he settled early.

No need to complain.

enthusiasticsaver

That is a perfectly normal way of loan accounting.

Some loans front load the interest at the beginning, some charge interest monthly as yours is doing.

The total amount will be 48 times your monthly payment which as you say adds up to £26759 so you will be paying £3759 to Yorkshire for lending you £23k. How else is this £3759 to be added? Has the interest added each month changed since you first took it out? It should gradually go down as the loan balance decreases.