Personal Loan higher interest at the beginning
SomethingAboutMoney
Posts: 18 Forumite
in Loans
Newbie here.
I recently took out a Personal Loan with the CB over a 5-year period.
My intention is to pay it off early when my work load increases.
The problem is- I have noticed they are taking higher interest off at the beginning, so when the time comes to settle the balance I will have been hit with most of the interest. :mad:
The interest seems to be climbing every month. I phoned CB and the person I spoke to couldn't give me an answer as to how it works.
It doesn't say anything in the contract about higher interest rates at the beginning
I signed up to a set APR.
Are they allowed to do this?
I recently took out a Personal Loan with the CB over a 5-year period.
My intention is to pay it off early when my work load increases.
The problem is- I have noticed they are taking higher interest off at the beginning, so when the time comes to settle the balance I will have been hit with most of the interest. :mad:
The interest seems to be climbing every month. I phoned CB and the person I spoke to couldn't give me an answer as to how it works.
It doesn't say anything in the contract about higher interest rates at the beginning
I signed up to a set APR.
Are they allowed to do this?
0
Comments
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Interest is always higher at the start as the balance is higher.
Nothing to worry about.0 -
That's the way all loans work, interest is charged on the outstanding balance. So this means at the start of loan repayment period the interest is highest. Interest is usually calculated on a daily basis and so, for example, a 31 day month follows a 30 day month it may appear that interest charged is increasing. However this is unlikely to be the case.
If you tell us what you borrowed, repayment period and APR it will help to work out what you should be expecting in the future.0 -
The interest is not higher. The APR is set.
The outstanding loan is just higher so the interest is a greater amount.
If you set up a spreadsheet to see it lowering it might help explain.0 -
That's the way all loans work, interest is charged on the outstanding balance. So this means at the start of loan repayment period the interest is highest. Interest is usually calculated on a daily basis and so, for example, a 31 day month follows a 30 day month it may appear that interest charged is increasing. However this is unlikely to be the case.
That makes sense.
The higher interest in the second month threw me off though.
The loan is 10k over 5 years @ 12.9%
First month's interest £70
Second month's interest £1000 -
I think the first month wasn't a full 30/31 day period. According to a loan calculator I tried the interest at the beginning of the loan is just over £100, and reduces below £100 after 6 months or so. E.g.:
Payment Capital Interest Balance
Month 1 £227.02 £119.52 £107.50 £9,880.48
Month 2 £227.02 £120.80 £106.22 £9,759.68
Month 3 £227.02 £122.10 £104.92 £9,637.57
Month 4 £227.02 £123.42 £103.60 £9,514.16
Month 5 £227.02 £124.74 £102.28 £9,389.42
Month 6 £227.02 £126.08 £100.94 £9,263.33
Month 7 £227.02 £127.44 £99.58 £9,135.90
Month 8 £227.02 £128.81 £98.21 £9,007.09
Month 9 £227.02 £130.19 £96.83 £8,876.89
Month 10 £227.02 £131.59 £95.43 £8,745.30
Month 11 £227.02 £133.01 £94.01 £8,612.29
Month 12 £227.02 £134.44 £92.58 £8,477.86
The numbers might not exactly match yours but will be close I suspect.0 -
I think the first month wasn't a full 30/31 day period. According to a loan calculator I tried the interest at the beginning of the loan is just over £100, and reduces below £100 after 6 months or so. E.g.:
Payment Capital Interest Balance
Month 1 £227.02 £119.52 £107.50 £9,880.48
Month 2 £227.02 £120.80 £106.22 £9,759.68
Month 3 £227.02 £122.10 £104.92 £9,637.57
Month 4 £227.02 £123.42 £103.60 £9,514.16
Month 5 £227.02 £124.74 £102.28 £9,389.42
Month 6 £227.02 £126.08 £100.94 £9,263.33
Month 7 £227.02 £127.44 £99.58 £9,135.90
Month 8 £227.02 £128.81 £98.21 £9,007.09
Month 9 £227.02 £130.19 £96.83 £8,876.89
Month 10 £227.02 £131.59 £95.43 £8,745.30
Month 11 £227.02 £133.01 £94.01 £8,612.29
Month 12 £227.02 £134.44 £92.58 £8,477.86
The numbers might not exactly match yours but will be close I suspect.
Thanks for this, gives me a rough idea whats ahead.
Cheers0 -
SomethingAboutMoney wrote: »The loan is 10k over 5 years @ 12.9%
Thats a good idea to try and overpay ASAP at that rate.
I would try and get yourself a barclaycard, lloyds CC and maybe a halifax CC and do some money transfers and balance transfers to get your interest rate down.0 -
Thats a good idea to try and overpay ASAP at that rate.
I would try and get yourself a barclaycard, lloyds CC and maybe a halifax CC and do some money transfers and balance transfers to get your interest rate down.
I received a deal through the post today on one of my CC that has nil balance.
0% on balance and money transfers for 18 months.
I phoned CB and asked if it was ok to do a balance transfer onto one of my CC, they said no.
They can't stop me doing a money transfer into my current and paying that way however.0 -
That's correct. You can't BT loans.
Make sure you only move enough to the card that you are confident of clearing before the promo ends, assuming your standard APR is higher than the loan.0 -
if you get a few CC's with BT offers you can do the shuffle over a few years - aim to double the minimum repayment amount on the CC's though or at least the amount the loan would be.0
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