Barclayloan interest confusion

@ a starting balance of £11,004 you might expect daily interest to accrue at:

11,004 * 3.90% * 1/365

=£ 1.175

So, of that month's repayment (let's assume 30 days), you would expect the following to go against capital (rest paying off accrued interest):

229.26 LESS 1.175 * 30

=£194.01

Which is pretty close to the balance changes you observed.

Day count differences (ie not 30 days between payment dates) and perhaps 3.90% being an APR rather than the flat nominal rate may well account for the difference between calculation and observation.

I was under the impression that the balance showing on the loan is the total amount repayable already inclusive of interest?

Some lenders do or did show the balance in this way, however if this was the case with your loan the balance showing would be the total amount to pay (£13755.60) minus the payments you have made to date (£1146.30 assuming 5 payments to date) - which it clearly isn't.

In your case Barclays are showing the amount currently outstanding - calculated by deducting the payments you have made to date from the amount borrowed and adding the interest accrued to date (calculated on the declining balance and typically added on a daily basis) - if you have a mortgage your statement for that will show the current balance of the debt in the same way. If you Google Guardian Loan calculator and put your figures in you will see how the balance declines each month.

Moneybutterfly35 wrote: »

I did the same back in 2014 10,000 and I!!!8217;m currently dealing with them through the ombudsmen. They!!!8217;ve charged my interest understandably as part of my £201 monthly payment, but when I make overpayments I get charged interest too, £28,73 on the last one. (Contract I!!!8217;m not limited or charged on overpayments) Plus daily interest. When questioned they say it!!!8217;s calculated when my loan was taken over the set amount of months and calculated, not charged daily. They!!!8217;ve contradicted themselves 3 times with me. Hence I!!!8217;ve come on here to see if anyone else is having this problem.

Not sure what the problem is that you think you are having but lenders are entitled under the Early Settlement Regulations to add up to 58 days interest on partial settlements (aka overpayments) or full early settlements.
Its not a charge as such more a reduction in rebate of interest that you otherwise might have received that arises because lenders can post date the assumed date of early settlement up to 58 days after the actual date in their interest calculations.
All is explained here:-
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34687/12-1264-consumer-credit-directive-guidance.pdf

In particular paragraphs 14.39 and 14.40 on page 67

Page 61 & 63 are in reference to 95A which allows for an additional charge/Fee to be made should the lender wish to do so subject to the conditions therein (which is what the article on the MSE site is based on) however - this has no bearing on the 28/58 day interest charge which arises from the rebate calculation under the still existing early settlement regulations. In a nutshell nothing in 95A is intended to derogate the early settlement calculation rules used in 94


When a customer requests a full or partial early settlement the lender has to calculate a rebate of interest charges that would have otherwise been charged if the loan had continued as before. In calculating this rebate the assumed date of the full or partial early settlement is 28 days after the request or 58 days after (at the lenders discretion) if the loan has more than 12 months to run.


The customer then has 28 or 58 days in which to make the payment, if they make the payment earlier than the 28 or 58 day deadline the lender does not have to adjust the rebate of interest calculation already made, the customer is simply giving the lender some free working capital for a period.


NB The lender is always free to offer more generous terms than specified in the early settlement regulations - as some do of course