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  • FIRST POST
    • james5763
    • By james5763 30th Sep 18, 5:22 PM
    • 3Posts
    • 0Thanks
    james5763
    Should a fixed sum loan be going up?
    • #1
    • 30th Sep 18, 5:22 PM
    Should a fixed sum loan be going up? 30th Sep 18 at 5:22 PM
    Hi all, I took a loan out last year for the sum of £23,000
    Itís a personal fixed sim loan with Yorkshire bank
    Itís for 48 months
    Rate of interest applied to the credit 4.087% per annum fixed
    APR 7.9%

    The monthly payment is £557.49
    And it says the total amount I will have to pay is £26,759.30 and under this it says ď this means the amount you have borrowed plus interest and other costsĒ

    Now Iíve recently noticed around £110 a month being added onto the loan

    I contacted the back today to they said this is correct and they add on interest each month... is this correct?

    My monthly payment equals to £26,759.30 so I donít understand why they are adding more on each month?
    Never missed a payment or taken holiday time from it

    Any help Iíd really appreciate
    Thanks James
Page 1
    • forgotmyname
    • By forgotmyname 30th Sep 18, 6:31 PM
    • 28,740 Posts
    • 11,751 Thanks
    forgotmyname
    • #2
    • 30th Sep 18, 6:31 PM
    • #2
    • 30th Sep 18, 6:31 PM
    How are they adding more if your total to pay is the same?

    They are adding interest onto your initial loan. Pay it off early and save interest. Or pay what you agreed and the figures you have will be correct.
    Punctuation, Spelling and Grammar will be used sparingly. Due to rising costs of inflation.

    My contribution to MSE. Other contributions will only be used if they cost me nothing.

    Due to me being a tight git.
    • Nearlyold
    • By Nearlyold 30th Sep 18, 6:46 PM
    • 1,263 Posts
    • 1,098 Thanks
    Nearlyold
    • #3
    • 30th Sep 18, 6:46 PM
    • #3
    • 30th Sep 18, 6:46 PM
    What you are seeing is perfectly normal and is how all loans work.

    Your monthly payment takes account of the interest that will be charged over the whole term of the loan, so it covers both the interest and the amount you borrowed.

    They add the interest each month to the balance (the interest is calculated on the total amount still owed in that month). Your monthly payment then reduces the amount you owe by the difference between your payment and the interest for that month. Each month the interest added will be slightly less (because its charged on the outstanding balance) you'll notice on your statement the balance reduces each month - eventually the balance owing will be nil by which time you will have paid the agreed total of £26,759.30 and fully repaid the loan.

    Google Guardian Loan Calculator and put your figures in, you'll then see how it all works
    Last edited by Nearlyold; 30-09-2018 at 6:54 PM.
    • nic_c
    • By nic_c 30th Sep 18, 7:49 PM
    • 1,880 Posts
    • 992 Thanks
    nic_c
    • #4
    • 30th Sep 18, 7:49 PM
    • #4
    • 30th Sep 18, 7:49 PM
    You took a loan out last year for the sum of £23,000 and the total amount I will have to pay is £26,759.30 - how do you think the extra £3,759.30 is added? All at the beginning!!! If any of it was fees,that gets added straight away, the interest gets added monthly and based on how much is left. If you make payments on time, nothing more nothing less, it will work as agreed. So its not going up, just they have not added all the interest yet.

    As interest is calculated monthly, then if you make over payments, then the sum owed is smaller and you end up paying less interest over the term
    • james5763
    • By james5763 30th Sep 18, 8:57 PM
    • 3 Posts
    • 0 Thanks
    james5763
    • #5
    • 30th Sep 18, 8:57 PM
    • #5
    • 30th Sep 18, 8:57 PM
    I understand the loan needs the interest adding and from what was under the impression the interest is included in the £557.49 monthly payments

    To help I took a picture on the remained loan amount on the 9th of September ( 4 days after September payment) and the balance was £16,974.96
    Then I look again yesterday and its jumped up to £17,082.04

    I could understand if I was only paying back the loan without interest then they added it on the balance each month but 48 months at £557.49 equals my loan total so it doesn't explain the money added each month just like above
    • zx81
    • By zx81 30th Sep 18, 9:15 PM
    • 21,167 Posts
    • 22,846 Thanks
    zx81
    • #6
    • 30th Sep 18, 9:15 PM
    • #6
    • 30th Sep 18, 9:15 PM
    The money added is the interest.

    Don't worry about it. It's perfectly normal.
    • Caz3121
    • By Caz3121 30th Sep 18, 9:28 PM
    • 11,847 Posts
    • 7,726 Thanks
    Caz3121
    • #7
    • 30th Sep 18, 9:28 PM
    • #7
    • 30th Sep 18, 9:28 PM
    I understand the loan needs the interest adding and from what was under the impression the interest is included in the £557.49 monthly payments

    To help I took a picture on the remained loan amount on the 9th of September ( 4 days after September payment) and the balance was £16,974.96
    Then I look again yesterday and its jumped up to £17,082.04

    I could understand if I was only paying back the loan without interest then they added it on the balance each month but 48 months at £557.49 equals my loan total so it doesn't explain the money added each month just like above
    Originally posted by james5763
    you have misunderstood the numbers
    The £16k-£17k will continue to have interest applied until it is paid off
    Multiply the remaining months by £557.49 and you will see a difference of £2k+ which is the interest and is added daily
    • foxy-stoat
    • By foxy-stoat 1st Oct 18, 11:51 AM
    • 3,834 Posts
    • 2,168 Thanks
    foxy-stoat
    • #8
    • 1st Oct 18, 11:51 AM
    • #8
    • 1st Oct 18, 11:51 AM
    I understand the loan needs the interest adding and from what was under the impression the interest is included in the £557.49 monthly payments

    To help I took a picture on the remained loan amount on the 9th of September ( 4 days after September payment) and the balance was £16,974.96
    Then I look again yesterday and its jumped up to £17,082.04

    I could understand if I was only paying back the loan without interest then they added it on the balance each month but 48 months at £557.49 equals my loan total so it doesn't explain the money added each month just like above
    Originally posted by james5763
    The monthly amount hasnt changed has it and the interest is included in the payment.

    Its all normal.
    • Haztay35
    • By Haztay35 11th Jan 19, 3:26 PM
    • 2 Posts
    • 0 Thanks
    Haztay35
    • #9
    • 11th Jan 19, 3:26 PM
    No interest rebate
    • #9
    • 11th Jan 19, 3:26 PM
    My son took out a similar loan with Yorkshire Bank and has just paid a settlement figure. * the monthly figure with how many months he had left was equal to the amount he was told to repay. On the agreement letter it says twice that he should be entitled to a rebate (he paid it 16 months early) but they have told him over the phone that he wasn't entitled to it.
    I told him to put a complaint in to the bank, but wondered if this is a common thing.
    • foxy-stoat
    • By foxy-stoat 11th Jan 19, 3:38 PM
    • 3,834 Posts
    • 2,168 Thanks
    foxy-stoat
    My son took out a similar loan with Yorkshire Bank and has just paid a settlement figure. * the monthly figure with how many months he had left was equal to the amount he was told to repay. On the agreement letter it says twice that he should be entitled to a rebate (he paid it 16 months early) but they have told him over the phone that he wasn't entitled to it.
    I told him to put a complaint in to the bank, but wondered if this is a common thing.
    Originally posted by Haztay35
    He is not entitled to a rebate on the interest already paid - why would he? The "rebate" was for the interest that he has yet to pay as he settled early.

    No need to complain.
    • enthusiasticsaver
    • By enthusiasticsaver 13th Jan 19, 5:39 PM
    • 8,216 Posts
    • 18,584 Thanks
    enthusiasticsaver
    That is a perfectly normal way of loan accounting.

    Some loans front load the interest at the beginning, some charge interest monthly as yours is doing.

    The total amount will be 48 times your monthly payment which as you say adds up to £26759 so you will be paying £3759 to Yorkshire for lending you £23k. How else is this £3759 to be added? Has the interest added each month changed since you first took it out? It should gradually go down as the loan balance decreases.
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • enthusiasticsaver
    • By enthusiasticsaver 13th Jan 19, 5:49 PM
    • 8,216 Posts
    • 18,584 Thanks
    enthusiasticsaver
    So as an example the balance in September was £16974.96. The interest for the month of September is added which is £107.08 making a balance of £17082.04 then the monthly repayment will be deducted from the balance making the balance £16524.55. The balance will gradually reduce each month but the interest will be added on. This should also get lower as the balance decreases so as the loan gets near to finishing your £557.49 should mainly comprise of capital repayment and very little interest.
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • John Blaze
    • By John Blaze 13th Jan 19, 9:43 PM
    • 23 Posts
    • 24 Thanks
    John Blaze
    Your payments are 557.49p per month to be paid over 48 months.

    557.49 x 48 = 26,759.52

    I'm guessing on your balance sheet you begun at £23,000. You are aware that 3,759.52 is the interest amount. Now assuming your balance sheet begun at £23,000 you should expect a monthly reduction of £557.49 (your monthly payment) to your balance and the monthly interest (3,759.52/48) of £78.32 to be added to the balance.

    If it is £110 a month being added I would query that.

    If your balance sheet begun at £26,759.52 then I see no reason why further interest would or should be added to the balance, if the monthly payments are £557.49. So again in that instance I would query.
    • molerat
    • By molerat 13th Jan 19, 10:54 PM
    • 20,392 Posts
    • 14,694 Thanks
    molerat
    Your payments are 557.49p per month to be paid over 48 months.

    557.49 x 48 = 26,759.52

    I'm guessing on your balance sheet you begun at £23,000. You are aware that 3,759.52 is the interest amount. Now assuming your balance sheet begun at £23,000 you should expect a monthly reduction of £557.49 (your monthly payment) to your balance and the monthly interest (3,759.52/48) of £78.32 to be added to the balance.

    If it is £110 a month being added I would query that.

    If your balance sheet begun at £26,759.52 then I see no reason why further interest would or should be added to the balance, if the monthly payments are £557.49. So again in that instance I would query.
    Originally posted by John Blaze
    Wrong I am afraid. The interest is calculated on the daily outstanding balance. The monthly interest in the early stages is high and reduces as the capital amount reduces, something around £145 at the beginning, £110 being around the 14 month point and around £3 in the final month.
    Last edited by molerat; 13-01-2019 at 11:04 PM.
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    • enthusiasticsaver
    • By enthusiasticsaver 13th Jan 19, 11:58 PM
    • 8,216 Posts
    • 18,584 Thanks
    enthusiasticsaver
    You are aware that 3,759.52 is the interest amount. Now assuming your balance sheet begun at £23,000 you should expect a monthly reduction of £557.49 (your monthly payment) to your balance and the monthly interest (3,759.52/48) of £78.32 to be added to the balance.

    Originally posted by John Blaze
    The interest will not be the same each month. It is calculated on the balance of the loan so it is at its highest in the early stages and reduces as the balance does.
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • John Blaze
    • By John Blaze 14th Jan 19, 1:11 PM
    • 23 Posts
    • 24 Thanks
    John Blaze
    Yes you are right on that. The interest does decrease per month. Has the OP clarified the balance begun at £23,000? If so everything seems legit here.
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