Cheers for that, very useful. I understand it now. Interest is 8.9% per year. So in the first month I pay 8.9% of £7,500 divided by 12, which is about £55 interest. Second month I pay interest on roughly £7,400. That's fair.jennyjj01 wrote: ↑Sat Jul 08, 2023 9:02 pmI could explain it thoroughly, but here's the crux. I have to make some assumptions, because you should actually be paying 155.32.....Frnc wrote: ↑Sat Jul 08, 2023 3:11 pm I got a loan for £7500 over 60 months, interest rate is 8.9%. Monthly payment £154.
I've calculated that £101 goes against capital, and £53 is interest. That's about 33% of my payments!
Can someone explain it?
It is like a mortgage, where the interest is all loaded to the early years? Those are a right rip off. I sold a house after paying a mortgage for years, and owed them almost as much as at the start.
If I make overpayments, apparently it changes the duration, not the monthly payment. Obviously the amount owed is less, so the interest is less.
At the start of the term you owe a lot, the interest due is a lot and your fixed payment covers it with just enough left over to pay down about £99 of capital.
But as the term progresses, you owe less and the interest due each month is less and your fixed payment will pay off a bit more of the outstanding debt.
As daylen said, interest is not 'front loaded' It's just that the more your outstanding balance is, the more interest is due each month and the less your fixed repayment actually repays.
Now Here's an eye opener.....
You pay them 154 x 60 = £9240 which means your loan cost £1740 in interest. Not outrageous. Not fantastic.
Here's a repayment schedule assuming your interest is calculated fresh every month at 12th of the annual amount. Actually your £154 will leave a residual debt of about £100, but this is close enough...
#Month Outstanding Interest Due Capital Repaid 1 7500 55.31 98.69 2 7401.31 54.58 99.42 3 7301.89 53.85 100.15 4 7201.74 53.11 100.89 5 7100.85 52.37 101.63 6 6999.22 51.62 102.38 7 6896.84 50.86 103.14 8 6793.7 50.10 103.90 9 6689.8 49.34 104.66 10 6585.14 48.57 105.43 11 6479.71 47.79 106.21 12 6373.5 47 107 13 6266.5 46.22 107.78 14 6158.72 45.42 108.58 15 6050.14 44.62 109.38 16 5940.76 43.81 110.19 17 5830.57 43 111 18 5719.57 42.18 111.82 19 5607.75 41.36 112.64 20 5495.11 40.53 113.47 21 5381.64 39.69 114.31 22 5267.33 38.85 115.15 23 5152.18 38.00 116 24 5036.18 37.14 116.86 25 4919.32 36.28 117.72 26 4801.6 35.41 118.59 27 4683.01 34.54 119.46 28 4563.55 33.66 120.34 29 4443.21 32.77 121.23 30 4321.98 31.87 122.13 31 4199.85 30.97 123.03 32 4076.82 30.07 123.93 33 3952.89 29.15 124.85 34 3828.04 28.23 125.77 35 3702.27 27.30 126.7 36 3575.57 26.37 127.63 37 3447.94 25.43 128.57 38 3319.37 24.48 129.52 39 3189.85 23.53 130.47 40 3059.38 22.56 131.44 41 2927.94 21.59 132.41 42 2795.53 20.62 133.38 43 2662.15 19.63 134.37 44 2527.78 18.63 135.36 45 2392.42 17.64 136.36 46 2256.06 16.64 137.36 47 2118.7 15.63 138.37 48 1980.33 14.60 139.4 49 1840.93 13.58 140.42 50 1700.51 12.54 141.46 51 1559.05 11.50 142.5 52 1416.55 10.45 143.55 53 1273 9.39 144.61 54 1128.39 8.32 145.68 55 982.71 7.25 146.75 56 835.96 6.1 147.83 57 688.13 5.07 148.93 58 539.2 3.98 150.02 59 389.18 2.87 151.13 60 238.05 1.76 152.24
So if I over pay....suppose I pay £1000 off....I'll be jumping forward in that table, paying less interst and more capital each month, right?
