ScoobyDoo555

As topic says - been given some figures, but how do you work it out from a given apr, term and amount you want to borrow?

Thanks

Dan

Dracoro

Quite simple. If the monthy payment is the same every month then as follows:

Using the following as an example
Loan (e.g. £5000)
Period 4 years
APR 5.8%

yr 1 - £5000 * 1.058 = £5290
yr 2 - £5290 * 1.058 = £5,596.82
yr 3 - £5,596.82 * 1.058 = £5,921.44
yr 4 - £5,921.44 * 1.058 = £6,264.88

So total amount payable is £6,264.88 over 48 months (i.e. 4 years) which is a monthly payment of.....

£130.52

In other words, the loan has cost you £1,264.88.

Reffro

Not quite how it works I'm afraid. Loans are calculated on a flat rate.

The formula to work out the repayments based on a flat rate is as follows:-

(Loan Amount * ((Flat rate expressed as a decimal of one*no.of years)+1))/ No.of months = Monthly repayment.

Flat rate is usually about half the APR. To work out the repayments for your example you should do the following:-

(30000*((0.045*3)+1))/36 If the APR is 9, half that to get 4.5 and divide that 4.5 by 100 to get 0.045.
=>
(30000*(0.135+1))/36 Multiply the flat rate by the no.of years of the loan 0.045 * 3 = 0.135
=>
(30000*1.135)/36 Add one to 0.135 to get 1.135 and multiply this 1.135 by the amount borrowed which gives you the total amount to be repaid.
=>
34050/36 = £945.83 pm Divide the total amount to be repaid by the number of months the loan is to be paid over, to get you approx monthly repayment.

Follow that and the answer will be correct to about £2-3 pounds per month.

For £20000 over 4 years at 11%APR you get the following:-

(20000*((0.055*4)+1))/48 = £508.33pm

£5000 @ 5.8% over four years =

(5000*((0.029*4)+1))/48 = £116.25pm and total repayable = £5580.

ScoobyDoo555

Nice one guys

Dan

GrollySTI

£5000 loan over 4 years at 5.8%APR results in just £580 interest ??

Are you sure??

Well blow me - just checked the FSA website and they have an APR calculator - £5k @5.8% 0ver 4yrs is £117/month.

Spot on Reffro

Sport160

Yep, thats about right. Take a look at the AA or someone like that, 5000 over 4 years (48months) @ 5.8% APR = 117.84 per month, therefore £5639 total repayment.

Reffro

And the reason why the total repayment is slightly higher than my calculation is due to the 'fees' which are not included in the loan rate they advertise. Look for a company with no fees, and no early redemption penalty, IIRC the AA have both....

TopBanana

They probably use the Excel function like what I do!

john banks

£116.25/month is 5.5% APR, £117.84 is 6.2% APR to the nearest decimal place as APRs are usually specified.

From this I believe that the AA's quote of 5.8% APR is incorrect as APR is supposed to be inclusive of all the charges. Hopefully a Consumer Credit Act agreement with the £117.84 would show 6.2% APR in bold. Maybe they get away with it because it is illustrative?

Look out for front loaded interest - ie you may be paying off a disproportionate amount of interest in the early part of the loan.

For a typical car loan rate and term, 53% is a better estimate of flat rate (including charges) from APR rather than 50%, although the difference is less than £1 per month on this loan. So Reffro's undershoot and the AA's overshoot are hardly dealbreakers and I'm probably being pedantic

With a balloon the % is higher depending on the balloon.