Personal loan interest calculations query

spygirl

About to ask a very silly question, but hoping you will go easy on me.

I took out a personal loan, the credit agreement specified x amount of payments weekly for the specified period of time.
Also stated cost of credit as x.

Weekly repayment x number of payments is equal to the amount borrowed and the cost of credit as outlined in the agreement. So far all is grand and I understand that perfectly.

However, I am also being charged interest every quarter on top of this. Overall this is increasing the cost of the loan far in excess of what's in the agreement.

So instead of paying back say 24,000 on a 20,000 loan as stated in the agreement I will pay in excess of this. Going by current amounts charged each quarter to date, roughly 5,000 more than i had expected to pay overall. Bringing overall cost of credit to almost 9,000.

I've also been ploughing extra payments in regularly to get loan cleared faster, save on interest etc, but am worried I'm paying a lot more for the cost of borrowing than I was told.

What did I miss in the initial agreement? It's a variable rate but the changes haven't been so high to account for an additional 2,300 in interest so far.

Any information you can give me to understand why there are extra quarterly interest payments on top of the loan repayment amount/cost of credit outlined in the agreement.

How can I work out if I am being charged too much interest?

Thanks, and apologies if this is a really basic question.

coylemj

spygirl wrote: »

Weekly repayment x number of payments is equal to the amount borrowed and the cost of credit as outlined in the agreement. So far all is grand and I understand that perfectly.

However, I am also being charged interest every quarter on top of this. Overall this is increasing the cost of the loan far in excess of what's in the agreement.

There was a similar thread here recently in which the OP thought that the interest being added each month in his statement was on top of what he agreed to pay. Which was not the case.....

https://www.boards.ie/vbulletin/showthread.php?t=2058157372

spygirl

Thanks for the link to the thread, but I am still a bit dim on it. Sorry.
The loan was for 19,425.87.
The repayments were 257 weekly payments of 93.23 a week.
Total amount repayable was listed as €23,960.11 with the cost of credit being €4,534.24

93.23 *257 = €23,960.11.

Each quarter there is another deduction for about 390 for interest. So the balance remaining increases by that amount each quarter

I thought the interest amount was rolled into the 93.23 a week, is that not what's happening?

cython

spygirl wrote: »

Thanks for the link to the thread, but I am still a bit dim on it. Sorry.
The loan was for 19,425.87.
The repayments were 257 weekly payments of 93.23 a week.
Total amount repayable was listed as €23,960.11 with the cost of credit being €4,534.24

93.23 *257 = €23,960.11.

Each quarter there is another deduction for about 390 for interest. So the balance remaining increases by that amount each quarter

I thought the interest amount was rolled into the 93.23 a week, is that not what's happening?

That sounds standard enough, with the interest being added to the amount so as to make a zero sum at the end of it. Is the amount posted each quarter getting smaller each time? It should go down as the principal is paid off, meaning that each subsequent payment will be paying off an increasing amount of the principal.

spygirl

No, which is the weird part, the only fluctuation in it seems to occur where there has been a five week month and then it has been more. Plus I have been doubling the payments each week from the start as wanted to clear it faster.

So the weekly payment is not inclusive of interest, is that what it is?

Or is it a case of it all balances out in the end?

OP_rah

When finance providers issue loans/statements the figure that they will include as the opening balance is the €19k.
Every month, or every quarter in your case, you will see an extra amount added onto the loan. This is the finance provider adding on the interest to the initial €19k.
Interest is only earned by the finance provider as the term of the loan progresses.
All of them interest amounts will eventually make the total balance owed add up to the €23k.
Keep in mind the interest charge will keep reducing as the loan balance gets smaller.

spygirl

So it is case that it works out at the end then. Phew, was concerned when this quarterly amount never seemed to drop despite making extra payments each week.

OP_rah

spygirl wrote: »

So it is case that it works out at the end then. Phew, was concerned when this quarterly amount never seemed to drop despite making extra payments each week.

When you say its never dropped, is there even a few euro in the difference? How many quarter charges have you looked at?

spygirl

I took out the loan in Apr 20, so June Sept and December of each year since. Only difference has been in two quarters, Dec just gone and June of last year where it was about 10 more, at 30 -/+ a few cents.

Was worried interest wasn't being calculated correctly due to making over payments and my plan to clear ahead of time wasn't going to work out.

Are you sure the extra loan payments are coming off the principal. Sometimes this is not automatic.

Post up latest statement balance and interest rate and we can tell you what it should be approx.

spygirl

yeah the principal amount is coming down every week, I plan on having it cleared by late this year if all goes according to plan. I just assumed that if I paid the loan back in half the time, as a rough guide I would only pay half the interest/cost of credit quoted initially.

spygirl

Thanks for the help guys much appreciated. No longer as dim on this stuff as I was this morning, thanks for the assistance.

coylemj

spygirl wrote: »

The loan was for 19,425.87.
The repayments were 257 weekly payments of 93.23 a week.
Total amount repayable was listed as €23,960.11 with the cost of credit being €4,534.24

93.23 *257 = €23,960.11.

Each quarter there is another deduction for about 390 for interest. So the balance remaining increases by that amount each quarter

The APR on that loan is 9.02%. The interest on your statements shouldn't concern you because the loan will be paid off after 257 weeks if you make the agreed payments.

I know you've been making additional payments to shorten the duration but if you had not been doing so and if, as you say, interest is accrued each quarter (13 weeks), the amount of interest you'd see being added at the end of each quarter since you took out the loan would have been as follows....

June 2020 411.80
Sept 2020 394.33
Dec 2020 376.49