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Bank Loan but not as we know it
Can somebody out there please calculate the following loan total cost. £41,600 loan over 15 years with an APR of 5.5%, interest added quarterly and equal monthly payments. The Bank has come up with a figure which is in excess of what I think it should be, having calculated using other websites. Could there be any plausible reason for the apparent £650 discrepancy. The Bank refuses to accept there is anything wrong and now even refuse to communicate with me ! Thanks
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Comments
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Ultimately you have a choice to accept the loan on the banks terms or not.
It is unusual for loan interest to be added quarterly and there can be a discrepancy if the interest is front loaded but a normal loan calculator I used comes out at £339.35 per month with 5.5% interest quarterly but monthly repayments. Total loan cost £61083.85I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.1 -
£40k loan.
15 years.
Possible query over £650 in total repayable.
Rounding error.1 -
What's the nominal interest rate quoted as opposed to the APR?
What figure are you arriving at?1 -
My answer is £61,183.21 along with everybody else apart from the bank who arrive at £61,963.79. I trust this is not rounding as suggested above. No nominal interest rate quoted. Any further thoughts much appreciated ! Thanks0
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About 1% difference.Ivorj said:£61,183.21
£61,963.79.
Very possibly rounding.
The thing about interest "added" quarterly may be a bit of a misnomer. Can you explain a bit more about that and why?
Most loans, the interest is calculated daily, so you are paying interest for longer until it shows in the account statement. That could easily account for the discrpancy, especially if your payment schedule is quarterly rather than monthly.1 -
They're allowed to charge two months interest for early repayment, maybe that's where the discrepancy comes from?Ivorj said:My answer is £61,183.21 along with everybody else apart from the bank who arrive at £61,963.79. I trust this is not rounding as suggested above. No nominal interest rate quoted. Any further thoughts much appreciated ! Thanks1 -
No it has nothing to do with early repayment, as this is the original contract at day 1
The interest is calculated daily but added to the account quarterly. I think the norm is monthly, but the bank has confirmed this makes no difference whatsoever to the final sum. Any further thoughts much appreciated ! Thanks1 -
Are your payments monthly or quarterly?1
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Monthly, I think the bank is wrong but won't provide any evidence of their calculation. The Financial Ombudsman looked into it but agreed that the bank was right apparently without the supporting evidence. I supplied my calculation which agreed with Experian and many other such calculation sites, but it made no difference to their decision, leaving me just wondering !0
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The online tools are only for indication. For a discrepancy of only 1% I would accept the bank calculation as correct.1
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