Should a fixed sum loan be going up?

enthusiasticsaver

So as an example the balance in September was £16974.96. The interest for the month of September is added which is £107.08 making a balance of £17082.04 then the monthly repayment will be deducted from the balance making the balance £16524.55. The balance will gradually reduce each month but the interest will be added on. This should also get lower as the balance decreases so as the loan gets near to finishing your £557.49 should mainly comprise of capital repayment and very little interest.

John_Blaze

Your payments are 557.49p per month to be paid over 48 months.

557.49 x 48 = 26,759.52

I'm guessing on your balance sheet you begun at £23,000. You are aware that 3,759.52 is the interest amount. Now assuming your balance sheet begun at £23,000 you should expect a monthly reduction of £557.49 (your monthly payment) to your balance and the monthly interest (3,759.52/48) of £78.32 to be added to the balance.

If it is £110 a month being added I would query that.

If your balance sheet begun at £26,759.52 then I see no reason why further interest would or should be added to the balance, if the monthly payments are £557.49. So again in that instance I would query.

molerat

John_Blaze wrote: »

Your payments are 557.49p per month to be paid over 48 months.

557.49 x 48 = 26,759.52

I'm guessing on your balance sheet you begun at £23,000. You are aware that 3,759.52 is the interest amount. Now assuming your balance sheet begun at £23,000 you should expect a monthly reduction of £557.49 (your monthly payment) to your balance and the monthly interest (3,759.52/48) of £78.32 to be added to the balance.

If it is £110 a month being added I would query that.

If your balance sheet begun at £26,759.52 then I see no reason why further interest would or should be added to the balance, if the monthly payments are £557.49. So again in that instance I would query.

Wrong I am afraid. The interest is calculated on the daily outstanding balance. The monthly interest in the early stages is high and reduces as the capital amount reduces, something around £145 at the beginning, £110 being around the 14 month point and around £3 in the final month.

enthusiasticsaver

John_Blaze wrote: »

You are aware that 3,759.52 is the interest amount. Now assuming your balance sheet begun at £23,000 you should expect a monthly reduction of £557.49 (your monthly payment) to your balance and the monthly interest (3,759.52/48) of £78.32 to be added to the balance.

The interest will not be the same each month. It is calculated on the balance of the loan so it is at its highest in the early stages and reduces as the balance does.

John_Blaze

Yes you are right on that. The interest does decrease per month. Has the OP clarified the balance begun at £23,000? If so everything seems legit here.