question about loans and interest etc

Random

so, heres a hypotetical situation that im looking for info on

if one has a load with apr of 12.384% and a "borrowing interest rate 11.200% plus 0.640% varying" and its setup for x consecutive monthly installments

the loan documentation might suggest that rates change and the agreed installments may not be enough to clear the loan on the date and one should get in contact to keep pace with interest rate changes etc

can anyone explain more about this for me?

thansk

Jet Black

I might be wrong but is this what you mean?

AIB wrote:

A variable interest rate loan is a personal loan which the interest rate charged on the outstanding balance varies as market interest rates change. However, your monthly repayments usually stay the same, so if interest rates rise during the loan term, you will have to make some extra payments at the end of the term. If the rate on your loan falls, you may pay off your loan earlier.

Random

i suppose im looking for peoples experience at the practical side of this.

if i have a loan for 3000 over 30 months with monthly payments of 100 each but then interest goes up, could the final payment end up being much much bigger than 100? or do they usually extend the payments further or give you notice of the increased final direct debit etc.

nlgbbbblth

If the repayments are made by direct debit then they will automatically change when the interest rate moves.

If the repayments are made by standing order then they have to manually amended. The bank may do this when they review your account (should be annually) or else you need to request them to do it. If there is a shortfall at the end they will contact you to arrange payment.

dotsman

nlgbbbblth wrote: »

If the repayments are made by direct debit then they will automatically change when the interest rate moves.

Not necessarily. Even though you may be repaying via direct debit, the bank may still take fixed repayment amounts over the course of the loan leaving the difference to the final repayment.

For the typical low value (a few thousand), short term (year or two etc) personal loan, with interest rates changing slightly over the course of the loan, this will only amount to a difference of a few euro at the end of the term.

pjmn

Random wrote: »

i suppose im looking for peoples experience at the practical side of this.

if i have a loan for 3000 over 30 months with monthly payments of 100 each but then interest goes up, could the final payment end up being much much bigger than 100? or do they usually extend the payments further or give you notice of the increased final direct debit etc.

... not sure if you are using illustrative figures or real ones... either way, if you pay back E100 per month for 30 months, that would only account for E3,000 (the original sum) - therefore your loan documentation should clarify how interest will be calculated and charged...

... the more usual scenario would be - e.g. E3k loan over 30 months (I'll assume a rate of 8% to illustrate) - then monthly repayments would equate to E110.59 (or total amount payable over the 30 months of E3,317.70). In terms of say interest rates increases on a variable rate loan, your lender may adjust your repayments in line with interest rates, or may leave repayments fixed, however period may extend beyond the 30 months to cater for higher interest rate.

Hope that helps....