Jitterbug - #22 exercise on even days. 2. 😇 January PAD - #112

NSD aim of 20/31. 11/31. SD 3/31 😇 Grocery Challenge Jan £46.79/£200 max.

Sealed pot challenge 14 - #63 - target £500 😇 Debt free by Xmas 2021 - TBA - £1000/£26,000

100% of 1,000 credit debt ❤️ 0% of 25,000 Nan’s mortgage

156.3-14.3=142=10s2lb. Lost so far 2/14 ♥️♥️👿👿👿👿👿👿👿👿👿👿👿👿

# Calculation confusion.

Sorry I’m a bit confused I wonder if you could help me.

I had a loan for £2000. Over 2 years.

I understood the interest to be 99.9%.

Total charge of £1804.

I have paid 6 months at 158.50 so £951.

To settle they need additional £1894.83, so totalling £2845.83, with interest being paid of £845.

I won’t have had the loan for a year, so why have I had to pay (nearly) half of the interest of 1804?

The interest should be closer to 1/4 or 1/3 of the 1804 that I would be charged if I kept it for the lifetime, as I’ve only had it for 6 months..?

What am I doing wrong here, I feel very confused.

Note: I know it the % is high but I had no other option and knew I’d be paying it back in full within 6 to 7 months, however I’d figured on the interest being £475.50, so a difference of £369.50, which I just can’t get my head around...maybe I just need more sleep :huh:

I had a loan for £2000. Over 2 years.

I understood the interest to be 99.9%.

Total charge of £1804.

I have paid 6 months at 158.50 so £951.

To settle they need additional £1894.83, so totalling £2845.83, with interest being paid of £845.

I won’t have had the loan for a year, so why have I had to pay (nearly) half of the interest of 1804?

The interest should be closer to 1/4 or 1/3 of the 1804 that I would be charged if I kept it for the lifetime, as I’ve only had it for 6 months..?

What am I doing wrong here, I feel very confused.

Note: I know it the % is high but I had no other option and knew I’d be paying it back in full within 6 to 7 months, however I’d figured on the interest being £475.50, so a difference of £369.50, which I just can’t get my head around...maybe I just need more sleep :huh:

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## Replies

Thanks in advance for any maths ability shared

NSD aim of 20/31. 11/31. SD 3/31 😇 Grocery Challenge Jan £46.79/£200 max.

Sealed pot challenge 14 - #63 - target £500 😇 Debt free by Xmas 2021 - TBA - £1000/£26,000

100% of 1,000 credit debt ❤️ 0% of 25,000 Nan’s mortgage

156.3-14.3=142=10s2lb. Lost so far 2/14 ♥️♥️👿👿👿👿👿👿👿👿👿👿👿👿

Sounds right. You need to remember that the total payable interest on a loan is not spread evenly over the term. It's calculated on the capital each month. The capital at the beginning is £2,000, so the interest is a % of this amount. Since the monthly figure is fixed, this means a greater proportion of the monthly cost is interest, with only a small proportion paying off the capital. The next month the capital is reduced slightly, so the proportion going towards interest is reduced slightly, meaning slightly more of your monthly cost is going towards capital. This then continues across the term.

Slowly but surely, the capital decreases and as the loan nears the end of the term the proportion of your payment going towards interest will reduce. It will look something like this:

Date Regular Payment Overpayment Capital Interest Balance

Month 1 | 31/01/2020 £158.50 £0.00 £39.67 £118.83 £1,960.33

Month 2 | 02/03/2020 £158.50 £0.00 £42.02 £116.48 £1,918.31

Month 3 | 02/04/2020 £158.50 £0.00 £44.52 £113.98 £1,873.79

Month 4 | 02/05/2020 £158.50 £0.00 £47.17 £111.33 £1,826.62

Month 5 | 02/06/2020 £158.50 £0.00 £49.97 £108.53 £1,776.65

Month 6 | 02/07/2020 £158.50 £0.00 £52.94 £105.56 £1,723.71

Month 7 | 02/08/2020 £158.50 £0.00 £56.08 £102.42 £1,667.63

Month 8 | 02/09/2020 £158.50 £0.00 £59.41 £99.09 £1,608.22

Month 9 | 02/10/2020 £158.50 £0.00 £62.94 £95.56 £1,545.28

Month 10 | 02/11/2020 £158.50 £0.00 £66.68 £91.82 £1,478.60

Month 11 | 02/12/2020 £158.50 £0.00 £70.65 £87.85 £1,407.95

Month 12 | 02/01/2021 £158.50 £0.00 £74.84 £83.66 £1,333.11

Month 13 | 02/02/2021 £158.50 £0.00 £79.29 £79.21 £1,253.82

Month 14 | 02/03/2021 £158.50 £0.00 £84.00 £74.50 £1,169.82

Month 15 | 02/04/2021 £158.50 £0.00 £88.99 £69.51 £1,080.83

Month 16 | 02/05/2021 £158.50 £0.00 £94.28 £64.22 £986.55

Month 17 | 02/06/2021 £158.50 £0.00 £99.88 £58.62 £886.67

Month 18 | 02/07/2021 £158.50 £0.00 £105.82 £52.68 £780.85

Month 19 | 02/08/2021 £158.50 £0.00 £112.10 £46.40 £668.75

Month 20 | 02/09/2021 £158.50 £0.00 £118.77 £39.73 £549.98

Month 21 | 02/10/2021 £158.50 £0.00 £125.82 £32.68 £424.16

Month 22 | 02/11/2021 £158.50 £0.00 £133.30 £25.20 £290.86

Month 23 | 02/12/2021 £158.50 £0.00 £141.22 £17.28 £149.64

Month 24 | 02/01/2022 £158.53 £0.00 £149.64 £8.89 £0.00

Your early payments pay off much less capital than your later ones.

The sooner you clear it, the more interest you'll save.

Any views are mine and not the official line of MoneySavingExpert.com.

The probably charged you 2 months interest on the early settlement figure.

NSD aim of 20/31. 11/31. SD 3/31 😇 Grocery Challenge Jan £46.79/£200 max.

Sealed pot challenge 14 - #63 - target £500 😇 Debt free by Xmas 2021 - TBA - £1000/£26,000

100% of 1,000 credit debt ❤️ 0% of 25,000 Nan’s mortgage

156.3-14.3=142=10s2lb. Lost so far 2/14 ♥️♥️👿👿👿👿👿👿👿👿👿👿👿👿

Not even 3 cents, its 3 pence.

You dont need to understand, it just is.

Doubt it will help the OP much though.