My Bank Loan Interest - Is it correct?

chickencurry02

Hi earlier last year (12th March 2010) when made unemployed I combined an existing loan, bank overdraft and credit card debt into one loan to tidy up my finances. The details of this loan are below:

amount of credit advanced : EUR15,850.00
PERIOD OF AGREEMENT 84 MONTHS
NO. OF REPAYMENT INSTALMENTS 365
aMOUNT OF EACH INSTALMENT EUR65.62
TOTAL AMOUNT REPAYABLE : EUR23,951.30
COST OF THIS CREDIT: EUR8,101.30
APR: 13.5%
.....
RATE OF INTEREST : 12.9% VARIABLE


Someone has recently told me that the interest i am been charged is too much. I havent a clue. If someone can give me any advice that the details outlined above are correct and were correct at the time of the loan, i would appreciate it very much. Thanks

uberwolf

http://www.ulsterbank.ie/roi/personal/borrowing/loans/loan-options/personal-loan/rates.ashx
http://www.aib.ie/personal/loans/Personal-Lending-Interest-Rates
http://personalbanking.bankofireland.com/loans/personal-loan#rates-accordion

coylemj

The numbers you quoted are correct based on a reducing balance with 365 weekly repayments over 7 years.

Applying an APR of 13.5% weekly to the balance and taking away the repayment of 65.62 each week, the outstanding balance after 365 weeks (on March 10th 2017) will be €3.50 which effectively means the loan is repaid.

The monthly interest on the outstanding balance is 0.2438211% because 1.002438211 raised to the power of 52 (the number of weeks in the year) is 1.135 which equates to an APR of 13.5%.

Pythia

If I were you, I would try to reduce the term on that once you get stabilised again.

chickencurry02

Thanks for advice. On question i have as i am on a variable rate does my apr fluctuate continuously and what does the 12.9%(variable) mean furthur down in the agreement. thanks again

coylemj

chickencurry02 wrote: »

Thanks for advice. On question i have as i am on a variable rate does my apr fluctuate continuously and what does the 12.9%(variable) mean furthur down in the agreement. thanks again

If the bank says the rate is variable then yes it can fluctuate but it also means that you can shorten the loan by paying off the odd lump sum or increase the weekly payment.

The main banks typically quote the quarterly rate multiplied by 4 as their 'variable rate'. An APR of 13.5% equates to 3.2165% per quarter, multiply this by 4 and you get 12.9% but the true rate is 1.032165 raised to the power of 4 which is 1.135, hence an APR of 13.5%.

chris85

As mentioned the variable rate can change and may very well change. The banks will be looking at what rate they can borrow at on the markets and if this increases then they may raise rates on their variable loans.

Its a high enough rate. There are other loans around at 7% interest but you are at a higher balance and also a longer repayment term so a lot different.

Really nothing can do about the rate as this was what was offered by the bank and you agreed to repay at this rate by signing the credit agreement.

Some of the credit unions seem to have good rates at moment. May be worth looking at trying to save something small with them and maybe a year down the road you could attempt to get a loan at a lower interest rate to clear your current loan.

chickencurry02

Thanks for advice folks.

So i only really have two options to save a bit of money

1. repay back in a shorter period i.e. 5 years instead of 7 years
2. try to get a loan from credit union at cheaper rate to pay back remainder off bank loan

also, when i was originally applying for loan should i have negotiated a cheaper rate. I never even thought of that, i thought all the interest rates were regulated and approved by the central bank and couldnt be changed. If i could i have negotiated have i messed up

chris85

chickencurry02 wrote: »

Thanks for advice folks.

So i only really have two options to save a bit of money

1. repay back in a shorter period i.e. 5 years instead of 7 years
2. try to get a loan from credit union at cheaper rate to pay back remainder off bank loan

also, when i was originally applying for loan should i have negotiated a cheaper rate. I never even thought of that, i thought all the interest rates were regulated and approved by the central bank and couldnt be changed. If i could i have negotiated have i messed up

There is no negotiating rates. Each bank sets their rates and you go to who you want to go to and see if they will approve the loan.

stepbar

chickencurry02 wrote: »

Thanks for advice folks.

So i only really have two options to save a bit of money

1. repay back in a shorter period i.e. 5 years instead of 7 years
2. try to get a loan from credit union at cheaper rate to pay back remainder off bank loan

also, when i was originally applying for loan should i have negotiated a cheaper rate. I never even thought of that, i thought all the interest rates were regulated and approved by the central bank and couldnt be changed. If i could i have negotiated have i messed up

In fairness, your negotiation power would have been pretty poor. The fact you had to combine existing debt due to unemployment illustrates this.

The interest being charged is correct from my calculations. Unfortunatly, the higher the rate and the longer the period; the longer it takes to clear the capital element of the loan. Even increasing your repayments by c20 eur a week would save you c2.5k. But I doubt you will be able to do this until you obtain employment.

In terms of the Credit Union option, realistically it's not. The Credit Union movement is having their own problems at the moment and many are facing restrictions on the amount they can lend monthly. I would also expect that you would need to have a savings track record as well before they would consider any lending. I'm afraid it's a matter of doing the best you can for the time being until you are able to secure employment.