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Lending company loan calculations...

Hi there, using the MSE loan calculator £10125.00 loan over 5 years at 6% is £195.00 per month.
When inquiring at high street loan companies they quote a figure of £219.00 per month for the same amount over 5 years at 6%
When I point out that a fixed rate of 6% should be £195.00 per month they say, thats the figure their computer gives them but they cant explain why!
Are they slipping compound interest though the back door?
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Comments

  • What high street loan companies are you referring to?
  • Chris_English
    Chris_English Posts: 466 Forumite
    100 Posts Name Dropper
    edited 27 January 2022 pm31 9:21PM
    Hi there, using the MSE loan calculator £10125.00 loan over 5 years at 6% is £195.00 per month.
    When inquiring at high street loan companies they quote a figure of £219.00 per month for the same amount over 5 years at 6%
    When I point out that a fixed rate of 6% should be £195.00 per month they say, thats the figure their computer gives them but they cant explain why!
    Are they slipping compound interest though the back door?
    I think that you are conflating simple and compound interest. 6% simple is £219 per month, 6% simple is about 12% APR.
  • Hi there, using the MSE loan calculator £10125.00 loan over 5 years at 6% is £195.00 per month.
    When inquiring at high street loan companies they quote a figure of £219.00 per month for the same amount over 5 years at 6%
    When I point out that a fixed rate of 6% should be £195.00 per month they say, thats the figure their computer gives them but they cant explain why!
    Are they slipping compound interest though the back door?
    I think that you are conflating simple and compound interest. 6% simple is £219 per month, 6% simple is about 12% APR.
    Although that doesn't really explain why MSE's "loan" calculator does understand how loans work.
  • Hi there, using the MSE loan calculator £10125.00 loan over 5 years at 6% is £195.00 per month.
    When inquiring at high street loan companies they quote a figure of £219.00 per month for the same amount over 5 years at 6%
    When I point out that a fixed rate of 6% should be £195.00 per month they say, thats the figure their computer gives them but they cant explain why!
    Are they slipping compound interest though the back door?
    I think that you are conflating simple and compound interest. 6% simple is £219 per month, 6% simple is about 12% APR.
    Although that doesn't really explain why MSE's "loan" calculator does understand how loans work.
    It works because the people putting it together understand how interest is calculated, whereas you are trying to claim that 6% simple interest over five years on £10,125 is £194 per year, which it isn’t.

    Simple interest is very easy to calculate. You borrow £10,125, and the interest is £10,125*0.06*5=£3,037.50

    Total amount repayable = £10,125+£3,037.50 = £13,162.50

    Divide that by 60 monthly payments and you get £13,162.50/60 = £219.375 per month.

    You seem perhaps to be working out the payments at an APR of 6%, then trying to claim that that’s what you should be paying at an APR of 6%
  • porkisnotmeat
    porkisnotmeat Posts: 72 Forumite
    10 Posts Name Dropper
    edited 28 January 2022 am31 12:09AM
    Hi there, using the MSE loan calculator £10125.00 loan over 5 years at 6% is £195.00 per month.
    When inquiring at high street loan companies they quote a figure of £219.00 per month for the same amount over 5 years at 6%
    When I point out that a fixed rate of 6% should be £195.00 per month they say, thats the figure their computer gives them but they cant explain why!
    Are they slipping compound interest though the back door?
    I think that you are conflating simple and compound interest. 6% simple is £219 per month, 6% simple is about 12% APR.
    Although that doesn't really explain why MSE's "loan" calculator does understand how loans work.
    It works because the people putting it together understand how interest is calculated, whereas you are trying to claim that 6% simple interest over five years on £10,125 is £194 per year, which it isn’t.

    Simple interest is very easy to calculate. You borrow £10,125, and the interest is £10,125*0.06*5=£3,037.50

    Total amount repayable = £10,125+£3,037.50 = £13,162.50

    Divide that by 60 monthly payments and you get £13,162.50/60 = £219.375 per month.

    You seem perhaps to be working out the payments at an APR of 6%, then trying to claim that that’s what you should be paying at an APR of 6%
    I'm not working out anything, I stated that it doesn't explain why MSE's loan calculator is giving out the wrong figure.  There was the implied element that the lender could be wrong too.  Most of the loan calculators I've used also appear to understand it, so why do the lenders not?  There is no way a CS rep in a call centre is calculating these figures.

    Instead of going guns blazing the moment you detect what you think is someone disagreeing with you, it might be helpful to read what they wrote, digest it, and then write your reply.
  • What is pork, if not meat?

    The MSE calculator does indeed give £195 a month on £10125 over 5 years if you say the APR is 6% but I suspect you are seeing the interest rate as 6% but the APR is 12% or whatever
  • Chris_English
    Chris_English Posts: 466 Forumite
    100 Posts Name Dropper
    edited 28 January 2022 pm31 12:21PM
    Hi there, using the MSE loan calculator £10125.00 loan over 5 years at 6% is £195.00 per month.
    When inquiring at high street loan companies they quote a figure of £219.00 per month for the same amount over 5 years at 6%
    When I point out that a fixed rate of 6% should be £195.00 per month they say, thats the figure their computer gives them but they cant explain why!
    Are they slipping compound interest though the back door?
    I think that you are conflating simple and compound interest. 6% simple is £219 per month, 6% simple is about 12% APR.
    Although that doesn't really explain why MSE's "loan" calculator does understand how loans work.
    It works because the people putting it together understand how interest is calculated, whereas you are trying to claim that 6% simple interest over five years on £10,125 is £194 per year, which it isn’t.

    Simple interest is very easy to calculate. You borrow £10,125, and the interest is £10,125*0.06*5=£3,037.50

    Total amount repayable = £10,125+£3,037.50 = £13,162.50

    Divide that by 60 monthly payments and you get £13,162.50/60 = £219.375 per month.

    You seem perhaps to be working out the payments at an APR of 6%, then trying to claim that that’s what you should be paying at an APR of 6%
    I'm not working out anything, I stated that it doesn't explain why MSE's loan calculator is giving out the wrong figure.  There was the implied element that the lender could be wrong too.  Most of the loan calculators I've used also appear to understand it, so why do the lenders not?  There is no way a CS rep in a call centre is calculating these figures.

    Instead of going guns blazing the moment you detect what you think is someone disagreeing with you, it might be helpful to read what they wrote, digest it, and then write your reply.
    Their calculator is not giving out the wrong information, you are just getting confused about what type of interest rate that you are putting in to it.

    There’s no shame in not understanding, but please try to tone down the indignation when someone politely tries to help you out with your numbers.

    Edited to add, I just checked the loan calculator, and the numbers are spot-on. I’m virtually certain that you have put in an APR or 6% which, of course, is not the rate on the loan that you are looking at, which has an APR of around 12%
  • What is pork, if not meat?

    The MSE calculator does indeed give £195 a month on £10125 over 5 years if you say the APR is 6% but I suspect you are seeing the interest rate as 6% but the APR is 12% or whatever
    Yes, he’s clearly putting a flat rate of 6% in as an APR or 6%, and getting confused about why the numbers don’t match. His higher figure is a 6% flat rate, the lower one is 6% APR, and he’s getting upset because he doesn’t know which one he’s using.
  • Goodness Guys, I didnt want to start a fight!
    Thanks for the feedback. I'm not the best on working all this out but you have shed some light
    on how loans are calculated.
    Last time I got a loan it was with a bank and it was 3.9% which if calculated on the MSE calc
    worked out to be the same figure as the banks.


  • Goodness Guys, I didnt want to start a fight!
    Thanks for the feedback. I'm not the best on working all this out but you have shed some light
    on how loans are calculated.
    Last time I got a loan it was with a bank and it was 3.9% which if calculated on the MSE calc
    worked out to be the same figure as the banks.


    You just need to remember that there are two common ways of quoting interest on a loan, APR and flat rate.

    For exactly the same amount, payments, and term, the APR number’s generally around twice the flat rate, which is why some lenders will slyly quote you the flat rate, to make it sound cheaper.

    APR includes interest and fees, so is the only one to use if you want to get a fair comparison.
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