Debit interest

Kerrytony77

Hi I just realised im paying €70 each month in debit interest on a loan Iv taking out.

Should I be paying this amount and if so why.

My monthly repayment is €177 for 5 years plus each month I’m been charged €70 in debit interest. The bank is TSB

coylemj

You say you're paying €177 p.m. plus €70 p.m. interest.

How much did you borrow and can you confirm that €247 is your total monthly repayment?

On a quick calculation, €247 would be the monthly repayment on a €12,000 loan over 5 years at 9% APR. The monthly interest would start high, at €86 in month 1 and would have reduced to €70 (the number you quoted) by month 14. That's for a loan with a reducing balance where the interest is applied monthly, some loans have the interest front loaded so the numbers would be different.

Kerrytony77

Yes I’m €247 on average. It goes up and down maybe 2 or 3 € each month.

I took out only €8000 over 5 years. And I have a direct debit set up for €177.14 each month.

Atlantic Dawn

Who was the loan with, seems insane rates. Have you taken out some kind of protection cover with it?

€8000 with AIB is €164 a month, total repay amount would be €9840
Yours is working out at total repay amount of €14820.

Kerrytony77

It’s with TSB. Interest rate is meant to be 11%. Can’t get on to the bank at all about it.

Surely it’s an over charging, would I be able to reclaim this I’m wondering

AlmightyCushion

Are you sure you're being charged 70 on top of the 170 payment? It looks like your figures add up. 170ish payment which includes 70ish interest. But you shouldn't be charged another 70 on top of that.

Open this link to see how much you would pay monthly for a 8,000, 5-year loan with a 11% interest rate: https://www.amortization-calc.com/loan-calculator/8000-11000-5-1-2021-2/

Kerrytony77

See attached a screenshot

AlmightyCushion

Kerrytony77 wrote: »

See attached a screenshot

Ok, that's normal. The 70 interest is being added to the balance and then your 170 payment reduces the balance by 170 euro.

Sheep Shagger

Kerrytony77 wrote: »

It’s with TSB. Interest rate is meant to be 11%. Can’t get on to the bank at all about it.

Surely it’s an over charging, would I be able to reclaim this I’m wondering

If you signed the loan agreement at 11% how is that overcharging?

If you can't get the bank on the phone, go to a branch, that is essential business so is allowed.

coylemj

Kerrytony77 wrote: »

Yes I’m €247 on average. It goes up and down maybe 2 or 3 € each month.

I took out only €8000 over 5 years. And I have a direct debit set up for €177.14 each month.

You're confused, there is no €247, the monthly repayment of €177.14 includes interest. The monthly interest reduces as the balance on the principal reduces. So each month, you are paying progressively less interest and more capital.

The bank calculates interest daily but only accrues it (adds it to the visible balance) each month. Some months are longer than others so there will be small variations, that's why you're seeing the monthly interest fluctuate by 2 or 3 euros.

By my reckoning, the monthly interest after one year would be of the order of 68-69 so I figure you were a year into the loan at the end of 2020, based on the numbers in the screenshot you posted.

I calculate the APR on that loan at 12.5%

Edit: I just checked on the pTSB website, they quoted me repayments of 177.15 p.m. for a loan of 8,000 over 5 years and they say the APR is 12.5%

Kerrytony77

But I’m paying more so than I should be €10628

What will I end up paying now.

Pacifico

Kerrytony77 wrote: »

But I’m paying more so than I should be €10628

What will I end up paying now.

That’s why

twowheelsonly

In the simplest terms of the €177 you're paying back a little over 100 is going towards the loan and the rest is going towards the interest.

Look at the monthly capital (balance of loan) that you posted.
Goes down by just over 100 a month.
This amount should rise a little as there's less and less interest to pay.

Your total will end up around that €10,600

Darc19

If you're paying €70 interest, then this is month 5 of your loan.

Next month it will be €69 and it will reduce by about €1.10 every month until it's paid off.

Basically the bank calculates interest on the balance you owe on a monthly basis, but they work out an average payment so you are paying the same every month.



https://www.amortization-calc.com/loan-calculator/

coylemj

Kerrytony77 wrote: »

But I’m paying more so than I should be €10628

What will I end up paying now.

You’re not paying ‘more’, you’re paying the correct amount.

The monthly repayment of 177.14 will pay off the loan. You are looking at the monthly interest and think that that will have to be paid on top of 177.14 Which is not correct.

Kerrytony77

Thanks I understand it now. When I looked at the app I seen it as. Bank takes €177 from me then adds back €70 on to my loan.

So I’m still basically repaying €177.14 x 60= €10628.40 cost of credit €2628.4.

I had it worked out in my head €177.14 plus debit interest €70 x60=€14828.4 with cost of credit € 6828.40 which is plus 85% of original loan of €8000