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    • SomethingAboutMoney
    • By SomethingAboutMoney 10th Jul 18, 10:09 PM
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    SomethingAboutMoney
    Personal Loan higher interest at the beginning
    • #1
    • 10th Jul 18, 10:09 PM
    Personal Loan higher interest at the beginning 10th Jul 18 at 10:09 PM
    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.

    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?
Page 1
    • zx81
    • By zx81 10th Jul 18, 10:13 PM
    • 17,660 Posts
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    zx81
    • #2
    • 10th Jul 18, 10:13 PM
    • #2
    • 10th Jul 18, 10:13 PM
    Interest is always higher at the start as the balance is higher.

    Nothing to worry about.
    • TadleyBaggie
    • By TadleyBaggie 10th Jul 18, 10:15 PM
    • 2,819 Posts
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    TadleyBaggie
    • #3
    • 10th Jul 18, 10:15 PM
    • #3
    • 10th Jul 18, 10:15 PM
    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.
    • Carrot007
    • By Carrot007 10th Jul 18, 10:17 PM
    • 1,365 Posts
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    Carrot007
    • #4
    • 10th Jul 18, 10:17 PM
    • #4
    • 10th Jul 18, 10:17 PM
    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.
    • SomethingAboutMoney
    • By SomethingAboutMoney 10th Jul 18, 10:42 PM
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    SomethingAboutMoney
    • #5
    • 10th Jul 18, 10:42 PM
    • #5
    • 10th Jul 18, 10:42 PM
    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 100
    • TadleyBaggie
    • By TadleyBaggie 11th Jul 18, 8:54 AM
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    TadleyBaggie
    • #6
    • 11th Jul 18, 8:54 AM
    • #6
    • 11th Jul 18, 8:54 AM
    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.
    • SomethingAboutMoney
    • By SomethingAboutMoney 11th Jul 18, 10:24 AM
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    SomethingAboutMoney
    • #7
    • 11th Jul 18, 10:24 AM
    • #7
    • 11th Jul 18, 10:24 AM
    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.

    Cheers
    • foxy-stoat
    • By foxy-stoat 11th Jul 18, 11:45 AM
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    foxy-stoat
    • #8
    • 11th Jul 18, 11:45 AM
    • #8
    • 11th Jul 18, 11:45 AM
    The loan is 10k over 5 years @ 12.9%
    Originally posted by SomethingAboutMoney
    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.
    • SomethingAboutMoney
    • By SomethingAboutMoney 11th Jul 18, 1:25 PM
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    SomethingAboutMoney
    • #9
    • 11th Jul 18, 1:25 PM
    • #9
    • 11th Jul 18, 1:25 PM
    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.
    • zx81
    • By zx81 11th Jul 18, 1:27 PM
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    zx81
    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.
    • foxy-stoat
    • By foxy-stoat 11th Jul 18, 1:53 PM
    • 2,186 Posts
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    foxy-stoat
    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.
    • SomethingAboutMoney
    • By SomethingAboutMoney 11th Jul 18, 2:03 PM
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    SomethingAboutMoney
    All sound advice.

    Thanks very much everyone!
    • SomethingAboutMoney
    • By SomethingAboutMoney 12th Jul 18, 2:23 PM
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    SomethingAboutMoney
    Back again.

    Turns out they charge 58 days interest on partial payments as well and tell me it would be cheaper to let the loan run it's course.

    I have 4500 limit on one CC (18 months deal), the other CC has 5250 limit- but I don't want to touch that as it's high interest.

    Unsure what to do now.

    Trying to get an answer out them is like drawing blood from a stone.
    • foxy-stoat
    • By foxy-stoat 12th Jul 18, 3:06 PM
    • 2,186 Posts
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    foxy-stoat
    What answers do you need, the 58 days of interest charged on part payments would of been stated on the credit agreement or key facts document at the start.

    You need low interest or 0% money transfer cards and do the balance transfer shuffle and overpay as much as you can to save money.

    It would not be cheaper to let the loan run. If you dont have enough limit on the current cards, apply for more with a money transfer option and keep on eye on the repayment dates so you wont lose the intro deals.
    • SomethingAboutMoney
    • By SomethingAboutMoney 12th Jul 18, 4:12 PM
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    SomethingAboutMoney
    The answer as to why it would be cheaper.

    I was going to do a partial payment of 4500 to the loan, this would leave me with a smaller balance and less interest. I knew they would charge me the 58 days interest to settle the balance...not for partial payments.

    I will need to dig out the contract.

    The reason why I don't pay the full balance off with another CC- not sure if I will get accepted for another one and if I do it might not be enough.
    • foxy-stoat
    • By foxy-stoat 12th Jul 18, 4:23 PM
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    foxy-stoat
    If it were me I would apply for another CC and see how you go.

    Good lucks
    • SomethingAboutMoney
    • By SomethingAboutMoney 12th Jul 18, 4:24 PM
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    • 0 Thanks
    SomethingAboutMoney
    Not to worry.

    Got accepted with another CC, a high enough limit and 28 months with 0%

    Phew!

    Good bye CB loan!
    • foxy-stoat
    • By foxy-stoat 12th Jul 18, 4:27 PM
    • 2,186 Posts
    • 1,186 Thanks
    foxy-stoat
    Happy day !

    Just make sure you can clear as much as you can and over pay everything month.
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