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Hire Purchase - How is interest charged?

  • 14-02-2018 9:58pm
    #1
    heritz
    Registered Users, Registered Users 2 Posts: 34 ✭


    From your experience, how is the interest normally distributed in a Hire Purchase agreement? Considering it's a fixed rate of ~8% per annum, do they normally frontload all the interest during the first few months, or do they spread the interest evenly over the term?

    Say they tell you that the total interest charges are €3500 for a loan of €15000 over 60 months, does it mean that every monthly repayment includes €58.33 in interest (3500/61) and the difference goes towards the balance? or do they use a different formula?

    With personal loans this is so easy to calculate as the rules of the game are pretty clear. However, I am finding these HP agreements a mystery, and calling the bank for an explanation is a waste of time as the operators have no idea of how the loan works. There is no mention either in the actual T&Cs of how the interest is charged!

    Just trying to understand how it works, so I can figure out if it's worth paying off the loan early or not.


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