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Car loan query

  • 01-07-2009 8:06pm
    #1
    Thoie
    Registered Users, Registered Users 2 Posts: 6,344 ✭✭✭


    I took out a car loan about 6 weeks ago, and just today added it to my online banking accounts.

    As far as I was aware, the APR on the loan was 10% (though will be going back through the paperwork to check when I get to it).

    So, the first transaction for that account was "withdrawing" the amount of the loan. The next transaction, the same day, was interest which is 16% of the full loan amount.

    I know APR is a guide, but I'm confused by a few things. Is it normal for the interest to be taken out in advance? I thought with most of these things interest would be applied daily/weekly/monthly/annually in arrears.

    Is that interest likely to be for the first year, or for the life of the loan (3 yrs)? If it's the compound interest applied for the life of the loan, it works out around 7% per year. I'll talk to the bank in the morning, but if anyone has any notion before then how this figure was calculated, that would be great.


Comments

  • #2
    stepbar
    Closed Accounts Posts: 6,123 ✭✭✭stepbar


    Thoie wrote: »
    I took out a car loan about 6 weeks ago, and just today added it to my online banking accounts.

    As far as I was aware, the APR on the loan was 10% (though will be going back through the paperwork to check when I get to it).

    So, the first transaction for that account was "withdrawing" the amount of the loan. The next transaction, the same day, was interest which is 16% of the full loan amount.

    I know APR is a guide, but I'm confused by a few things. Is it normal for the interest to be taken out in advance? I thought with most of these things interest would be applied daily/weekly/monthly/annually in arrears.

    Is that interest likely to be for the first year, or for the life of the loan (3 yrs)? If it's the compound interest applied for the life of the loan, it works out around 7% per year. I'll talk to the bank in the morning, but if anyone has any notion before then how this figure was calculated, that would be great.

    Are you sure it wasn't payment protection?


  • #3
    Thoie
    Registered Users, Registered Users 2 Posts: 6,344 ✭✭✭Thoie


    stepbar wrote: »
    Are you sure it wasn't payment protection?

    No, it definitely says "Interest". The payment protection appears monthly with the description "Payment protection".


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