David Lock

I thought it was quite straightforward but it seems a bit of a black art

So can one of you clever peeps give me a rough idea using 2 simple examples.

I borrow £10k over 10 years at fixed 10% interest.

I borrow £10k over 10 years with interest at 2.5% over base.

I am asking because I think I am being fed a lot of guff from Barclays where I have a loan.

THanks, David

Coffin Dodger

I'd have thought the 2.5% over base one the payments would vary anyway depending on base rate changes

As for the other is the interest on the loan calculated daily, weekly, monthly, or annually?

David Lock

1) Yes if BoE change base rate then Barlays may or mey not decide to change their rates.

2) I don't know. What I can't get my head around is that after say, 9 years most of the capital amount will have been paid off but IIRC monthly repayment rate is about the same???


dl

jods

That would suggest they took the capital amount (10K) and applied the interest of 10% as compound interest over 10 years then divided that amount by 120 to calculate the monthly repayment over the whole period of the loan - Or that could be a load of guff.

scunnered

iTrader: (1)

I'm not 100% sure about this, but I believe the first few years you are paying mostly interest and only a few quid on the balance each month. As the years go by you are paying less interest each month and more on the balance.

Terminator X

iTrader: (7)

There' some Law that they refer to in their gumpf isn't there re how to calculate interest etc? Noticed that they go back to 1984 rather than anything recent though presumably must be better for them.

If you take out a loan & pay it back almost straight away legend has it that you may owe more than the initial loan ...

TX.

m@thew

I think its normal to charge 2 months interest if you pay off the loan early.

Coffin Dodger

Usually in the loan agreement somewhere as to what the early repayment charges would be. Some flexible type loans don't have them but as mentioned for most it's a couple of months interest.