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Interest on Loan

  • 01-10-2007 4:55pm
    #1
    eirebhoy
    Closed Accounts Posts: 14,013 ✭✭✭✭


    This is my first loan since I've had internet banking so I'm a bit lost. I have a loan account of 2,000. APR is 10.328% and total amount repayable is 2,209. It automatically takes the payments from my savings account every week. Every 3 months I get charged interest. This is where I'm confused.

    How do they calculate this interest?
    If I paid off the loan tomorrow am I still going to be charged interest every 3 months for the duration of the loan?
    Why don't they just open a loan account with €2,209? :confused:


Comments

  • #2
    How Strange
    Registered Users, Registered Users 2 Posts: 6,339 ✭✭✭How Strange


    OP, they charge interest every quarter (3months). So what basically happens every quarter is that one repayment is offset against the interest amount charged.

    The interest rate they use depends on whether or not you got a fixed or variable rate loan account. You say its 10.328% so if your loan is fixed thats the rate they use to calculate the interest. If you are doubting it you should just ring the bank and ask them how the calculated the last interest charge and what rate they used.
    If I paid off the loan tomorrow am I still going to be charged interest every 3 months for the duration of the loan?
    Why don't they just open a loan account with €2,209?

    Usually if you are paying a loan off early you would ring the bank on the day you are paying the last installment or lump sum (if you are refinancing for a cheaper rate with another bank) and ask them how much it will be including interest to close that account on that day.

    Presumably you asked for a loan of €2209 so you got a credit into your bank account of €2000 and a loan account was opened for you to pay it back. You would've signed something initially explaining how much it would cost you to take the loan out so you would've known up front that €209 would be taken from you over the duration of the loan.

    Its amazing the amount of people who don't read the fine print when taking out loans.


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