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LOAN: Ulster Bank

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  • 05-11-2012 8:20pm
    #1
    msg11
    Closed Accounts Posts: 3,572 ✭✭✭


    I have a loan with Ulster Bank for 4000, I am repaying 135 PM for 36 months. So works out 4800 repayment.

    I have notice that it seems to be gaining interest on it's own. So it was 4000 and before the payments even started it up it too 4030. So when I paid back 135 off the loan it has dropped to 4895, then today I noticed another interest payment added so it's gone back up to 4950, interest of 55.

    My question is , is this normal? I would have though I agreed an interest with them in the repayment at 135 as that adds up to, 4860. I haven't missed any payments, me and the bank agreed a date of the 10th each month and this interest seems to be added on the 29/30th at the end of the month (Sept & Oct). This was when the loan was drawn down in September on the 5th and she asked when I would like to start a repayment, I said the 10th of each month. As my car insurance is at the end of the month don't want so much going out at once.

    Any ideas, this 4000 loan could work out about 7000 that couldn't be correct could it?


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    #2
    krattapopov
    Registered Users Posts: 1,199 ✭✭✭krattapopov


    Sounds about right, you pay 150 off all the time, a portion goes to capital and a portion goes to interest. Interest is always front loaded.

    Have a look at this loan calculator. Plug in the details and you can get a detailed breakdown of the payment schedule with capital and interest broken out - sure you can ask the bank for that as well.


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    #3
    msg11
    Closed Accounts Posts: 3,572 ✭✭✭msg11


    krattapopov wrote: »
    Sounds about right, you pay 150 off all the time, a portion goes to capital and a portion goes to interest. Interest is always front loaded.

    Have a look at this loan calculator. Plug in the details and you can get a detailed breakdown of the payment schedule with capital and interest broken out - sure you can ask the bank for that as well.

    So, I pay off 135 PM, but as I pay it off the loan is clearing but it get's bumped back up by interest. I was under the impression, that I just pay 135PM for 36 months, they get the 4000 back with 800 for the loan? With this extra interest going on the loan it's going to work out an extra 1800 on top of the 4800.. So nearly 2600 for a 4000 loan is that correct?


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    #4
    chris85
    Registered Users Posts: 4,502 ✭✭✭chris85


    msg11 wrote: »
    So, I pay off 135 PM, but as I pay it off the loan is clearing but it get's bumped back up by interest. I was under the impression, that I just pay 135PM for 36 months, they get the 4000 back with 800 for the loan? With this extra interest going on the loan it's going to work out an extra 1800 on top of the 4800.. So nearly 2600 for a 4000 loan is that correct?

    Ok interest is front loaded on all loans. The interest is calculated off the principle balance so as the loan value is more at the start the interest is more. As you come to the end of the loan the interest will be small so the majority of the €135 you pay will be off the principle.

    So €55 was paid in interest last payment, keep an eye on this as you keep paying and you will see the amount of interest reducing as the balance reduces.


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    #5
    Islander13
    Registered Users Posts: 1,218 ✭✭✭Islander13


    chris85 wrote: »
    Ok interest is front loaded on all loans. The interest is calculated off the principle balance so as the loan value is more at the start the interest is more. As you come to the end of the loan the interest will be small so the majority of the €135 you pay will be off the principle.

    So €55 was paid in interest last payment, keep an eye on this as you keep paying and you will see the amount of interest reducing as the balance reduces.

    Interest is not front loaded though. If interest was front loaded ALL interest would be added to the loan upfront with a straight line reduction month by month. This is a normal loan structure OP, nothing dodgy about it


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    #6
    chris85
    Registered Users Posts: 4,502 ✭✭✭chris85


    Islander13 wrote: »
    Interest is not front loaded though. If interest was front loaded ALL interest would be added to the loan upfront with a straight line reduction month by month. This is a normal loan structure OP, nothing dodgy about it

    It is front loaded as more interest is paid at the start of the loan than at the end. Simples.


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    #7
    Islander13
    Registered Users Posts: 1,218 ✭✭✭Islander13


    chris85 wrote: »
    It is front loaded as more interest is paid at the start of the loan than at the end. Simples.

    Nope you are incorrect. If you get a loan say over 5 years a bank can either add the total interest onto the loan at the start (frontloading) or add it every three months on a declining path as its paid off (quarterly in arrears). The latter is far more common in Ireland.

    Simples


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    #8
    Kenny Logins
    Registered Users Posts: 9,060 ✭✭✭Kenny Logins


    msg11 wrote: »
    I have a loan with Ulster Bank for 4000, I am repaying 135 PM for 36 months. So works out 4800 repayment.

    I have notice that it seems to be gaining interest on it's own. So it was 4000 and before the payments even started it up it too 4030. So when I paid back 135 off the loan it has dropped to 4895, then today I noticed another interest payment added so it's gone back up to 4950, interest of 55.

    My question is , is this normal? I would have though I agreed an interest with them in the repayment at 135 as that adds up to, 4860. I haven't missed any payments, me and the bank agreed a date of the 10th each month and this interest seems to be added on the 29/30th at the end of the month (Sept & Oct). This was when the loan was drawn down in September on the 5th and she asked when I would like to start a repayment, I said the 10th of each month. As my car insurance is at the end of the month don't want so much going out at once.

    Any ideas, this 4000 loan could work out about 7000 that couldn't be correct could it?

    Google for an 'amortisation table calculator', this will give you breakdown of all payments over the term.


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    #9
    msg11
    Closed Accounts Posts: 3,572 ✭✭✭msg11


    So am I correct in saying that it will work out at 135 PM over 36 months in the end.

    I think my sums are on the bases the bank is starting withdrawning repayments from the loan with interest at 4880, total amount payable. When what was drawn down was 4000 not 4800. So the bank are working out the interest off the 4000 loan on a P/M basis.

    Sorry my math is a bit all over the place.

    I get it now, so the bank adds interest to the remainder of the loan and then regardless subtracts the agreed 135 from it.


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    #10
    chris85
    Registered Users Posts: 4,502 ✭✭✭chris85


    Islander13 wrote: »
    Nope you are incorrect. If you get a loan say over 5 years a bank can either add the total interest onto the loan at the start (frontloading) or add it every three months on a declining path as its paid off (quarterly in arrears). The latter is far more common in Ireland.

    Simples

    Just because it's not added all at the start does not mean it's not front loaded. More is paid on interest at the start than end in normal loan agreements, thus more paid at the start so loaded more at the front with interest. Op has it sorted so no point debating the same point.


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