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BOI Term Loan extreme confusion

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  • 27-09-2020 12:25am
    #1
    croat
    Closed Accounts Posts: 14 ✭


    Greetings, I have borrowed from BOI Term Loan 5,000EUR in February. I will repay this in 5 years. My weekly installment is 23.43EUR. There will be 260 installments over the duration of the loan (5years).

    The total amount I will have to pay is 6,091.80EUR.

    "The Weekly repayments on a variable loan of €5,000.00
    over 60 months at a rate of 8.25% (8.5% APR) are
    €23.43. The total cost of credit is €1,091.80."

    So my question is because I am really confused, I saw on my BOI365 online banking that they charged me 99EUR for "interest rate" three months ago. Today, I was charged 103EUR for "interest rate". It seems that BOI is doing a back up of a loan with those amount of money so I am repaying my loan normally but after every couple of months I am back with this "interest rate". I have repaid only 400 EUR since I took the loan. I thought that all the interest rates are included in my weekly installments. I am confused right now, and it seems that for 5,000EUR I will repay more than 7,000EUR at this pace.


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    #2
    joebloggs32
    Registered Users Posts: 1,596 ✭✭✭joebloggs32


    croat wrote: »
    Greetings, I have borrowed from BOI Term Loan 5,000EUR in February. I will repay this in 5 years. My weekly installment is 23.43EUR. There will be 260 installments over the duration of the loan (5years).

    The total amount I will have to pay is 6,091.80EUR.

    "The Weekly repayments on a variable loan of €5,000.00
    over 60 months at a rate of 8.25% (8.5% APR) are
    €23.43. The total cost of credit is €1,091.80."

    So my question is because I am really confused, I saw on my BOI365 online banking that they charged me 99EUR for "interest rate" three months ago. Today, I was charged 103EUR for "interest rate". It seems that BOI is doing a back up of a loan with those amount of money so I am repaying my loan normally but after every couple of months I am back with this "interest rate". I have repaid only 400 EUR since I took the loan. I thought that all the interest rates are included in my weekly installments. I am confused right now, and it seems that for 5,000EUR I will repay more than 7,000EUR at this pace.

    The amount of interest being added quarterly should diminish as time passes by.
    I reckon the first chunk of i terest was not a full quarter as youtoom out the loan in February.


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    #3
    croat
    Closed Accounts Posts: 14 ✭croat


    joebloggs32 wrote: »
    The amount of interest being added quarterly should diminish as time passes by.
    I reckon the first chunk of i terest was not a full quarter as youtoom out the loan in February.

    Mr. Joe thanks for this. But can you please explain a little bit more. I am confused because the total cost of credit WITH EVERYTHING is 6,091. And when you do this 23.43 x 260 you got that number, 6,091. Simple as that. So this "interest" rate that is deducting quarterly is confusing.


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    #4
    rev2.0
    Registered Users Posts: 235 ✭✭rev2.0


    croat wrote: »
    Mr. Joe thanks for this. But can you please explain a little bit more. I am confused because the total cost of credit WITH EVERYTHING is 6,091. And when you do this 23.43 x 260 you got that number, 6,091. Simple as that. So this "interest" rate that is deducting quarterly is confusing.

    Interest is added to the loan account quarterly. When you view the loan in 365 Online, the loan balance at the beginning will be the loan amount drawn down i.e €5,000. Interest is then added quarterly to the account

    You will still only repay €6,091 but the €1,091 interest charges will be applied over the course of the loan, not up front


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    #5
    croat
    Closed Accounts Posts: 14 ✭croat


    rev2.0 wrote: »
    Interest is added to the loan account quarterly. When you view the loan in 365 Online, the loan balance at the beginning will be the loan amount drawn down i.e €5,000. Interest is then added quarterly to the account

    You will still only repay €6,091 but the €1,091 interest charges will be applied over the course of the loan, not up front


    Hi REV2.0

    Unfortunately I still do not understand this.

    Math is simple in this occasion.

    Weekly direct debit: 23.43
    Number of installments over 60 months: 260

    In contract is stated that all the cost (interest rate, cost of credit, etc) is in that 23.43.

    Therefore, 23.43 x 260 is 6,091.

    End of story. So basically, there just need to be debited weekly that amount of 23.43 without any other cost.

    Do you get me or I am an idiot?


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    #6
    IRtax
    Registered Users Posts: 25 ✭IRtax


    Interest is only applied quarterly on your loan. If you wanted to do the quick maths of €6091 then your loan balance would start with this and show this as the liability you owe. But that is not how loans work or can be recorded it has to show only the capital amount owing remaining at anytime then the interest is calculated quarterly and applied on the loan.


    croat wrote: »
    Hi REV2.0

    Unfortunately I still do not understand this.

    Math is simple in this occasion.

    Weekly direct debit: 23.43
    Number of installments over 60 months: 260

    In contract is stated that all the cost (interest rate, cost of credit, etc) is in that 23.43.

    Therefore, 23.43 x 260 is 6,091.

    End of story. So basically, there just need to be debited weekly that amount of 23.43 without any other cost.

    Do you get me or I am an idiot?


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    #7
    jaffa20
    Registered Users Posts: 4,512 ✭✭✭jaffa20


    Interest is front loaded on a loan. It's the same for a mortgage. So at the beginning, most of your payments are going towards interest and then towards end of loan, most is being paid of balance. That is my understanding.


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    #8
    croat
    Closed Accounts Posts: 14 ✭croat


    IRtax wrote: »
    Interest is only applied quarterly on your loan. If you wanted to do the quick maths of €6091 then your loan balance would start with this and show this as the liability you owe. But that is not how loans work or can be recorded it has to show only the capital amount owing remaining at anytime then the interest is calculated quarterly and applied on the loan.


    Ok, I finally understand this now. For **** sake, finally.
    Thank you so much. Actually, thanks to all three of you, who replied here in this post. Cheers


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    #9
    [Deleted User]
    Posts: 5,121 ✭✭✭ [Deleted User]


    croat wrote: »
    Hi REV2.0

    Unfortunately I still do not understand this.

    Math is simple in this occasion.

    Weekly direct debit: 23.43
    Number of installments over 60 months: 260

    In contract is stated that all the cost (interest rate, cost of credit, etc) is in that 23.43.

    Therefore, 23.43 x 260 is 6,091.

    End of story. So basically, there just need to be debited weekly that amount of 23.43 without any other cost.

    Do you get me or I am an idiot?
    I think you are misunderstanding how the interest is applied to the loan.
    They don't calculate the total on day 1 and add it and then deduct your repayments.
    They calculate and add the interest every few months, based on what is outstanding. It works out the same if you keep your payments the same.


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    #10
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,045 Mod ✭✭✭✭Jim2007


    croat wrote: »
    Ok, I finally understand this now. For **** sake, finally.
    Thank you so much. Actually, thanks to all three of you, who replied here in this post. Cheers

    Two things to be aware of:

    - You loan is governed by the loan agreement And the general terms and conditions of the bank

    - The math does not always come down to X amount per week for so many weeks. It is not unusual for there to be a small balance outstanding or over payment at the end.


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