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Methinkshe
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If one is paying 15.9% APR what would that equate to in terms of a headline interst rate?

Sorry, my brain is too befuddled through age and rustiness to even begin to work it out. I just have a youngster visiting who needs to know how 8% interest on a loan or 10% interest on a loan equates to his current 15.9% APR and I'm too stupid to be able to do the arithmetic - hangs head in shame.

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If one is paying 15.9% APR what would that equate to in terms of a headline interst rate?

Sorry, my brain is too befuddled through age and rustiness to even begin to work it out. I just have a youngster visiting who needs to know how 8% interest on a loan or 10% interest on a loan equates to his current 15.9% APR and I'm too stupid to be able to do the arithmetic - hangs head in shame.

No you are not stupid. it is impossible to tell.

You need to delve into each deal and check all the charges and rates, repayment dates, time of free credit and so on.

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If one is paying 15.9% APR what would that equate to in terms of a headline interst rate?

Sorry, my brain is too befuddled through age and rustiness to even begin to work it out. I just have a youngster visiting who needs to know how 8% interest on a loan or 10% interest on a loan equates to his current 15.9% APR and I'm too stupid to be able to do the arithmetic - hangs head in shame.

For instance, maybe the car dealer's trick of giving a "flat rate" interest interest figure. Paying off an 15.9% APR loan over 1 years will result in you paying a total amount of interest approx equal to 8% of the loan amount.

Or the interest is 8% and associated loan fees and costs mean the APR is 15.9%as Bloo says

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Thanks for the help so far.

I have here the details of a bank loan.

Amount of loan £7000

Period of loan 36 months

Amount of first repayment £242.47

35 further monthly repayments of £242.12

Total amount payable under this agreement £8716.67

APR 15.9%

What we are trying to work out is what this equates to in terms of headline rate - I'm guessing it is about 8% but I do not know how to do the arithmetic.

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Thanks for the help so far.

I have here the details of a bank loan.

Amount of loan £7000

Period of loan 36 months

Amount of first repayment £242.47

35 further monthly repayments of £242.12

Total amount payable under this agreement £8716.67

APR 15.9%

What we are trying to work out is what this equates to in terms of headline rate - I'm guessing it is about 8% but I do not know how to do the arithmetic.

http://www.moneymadeclear.fsa.gov.uk/tools...loan_calculator

put your figures in and the rate is higher. its impossible

the its the total costs you need to compare. matters not what the APR says.

Also, check out if they use "rule of 78" for early repayment. This method is mostly illegal in the US, but very common here. best avoided if you are planning to pay early on.

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Thanks for the help so far.

I have here the details of a bank loan.

Amount of loan £7000

Period of loan 36 months

Amount of first repayment £242.47

35 further monthly repayments of £242.12

Total amount payable under this agreement £8716.67

APR 15.9%

What we are trying to work out is what this equates to in terms of headline rate - I'm guessing it is about 8% but I do not know how to do the arithmetic.

14.85 compounded monthly

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14.85 compounded monthly

Just read the contract a bit further. The "simple" interest rate is 14.75% pa which is pretty much what you calculate. Is this the same thing as what I have referred to as the "headline" rate?

Further, if he refinances the resettlement figure of £6600 at a "headline" rate (for want of a better word) of 8% is this an improvement? Obviously it is at face value, but I could be missing something - I'm that dumb when it comes to this kind of stuff.

Thanks for your help and apologies for my ignorance.

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Just read the contract a bit further. The "simple" interest rate is 14.75% pa which is pretty much what you calculate. Is this the same thing as what I have referred to as the "headline" rate?

Further, if he refinances the resettlement figure of £6600 at a "headline" rate (for want of a better word) of 8% is this an improvement? Obviously it is at face value, but I could be missing something - I'm that dumb when it comes to this kind of stuff.

Thanks for your help and apologies for my ignorance.

Based on the monthly payments of £242.12 per month for 36 months, the nominal interest rate is effectively 14.85%. The 15.9% interest rate is called the effective interest rate (or APR). Really, do not concern yourself with this, it's just a mathematical conversion that's not worth worrying about.

What do you mean by resettlement figure ... need more explanation please ...

Edit: clarity

Edited by hourkid
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Based on the monthly payments of £242.12 per month for 36 months, the nominal interest rate is effectively 14.85%. The 15.9% interest rate the effective interest rate. Really, do not concern yourself with this, it's just a mathematical conversion that's not worth worrying about.

What do you mean by resettlement figure ... need more explanation please ...

Sorry - incorrect terminology - I should have said early settlement figure.

So, if he refinances the early settlement balance of £6,600 at 8% he'll be quids in.

What would the monthly repayments on £6,600 over 36 months be?

Edited by Methinkshe
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Thanks for the help so far.

I have here the details of a bank loan.

Amount of loan £7000

Period of loan 36 months

Amount of first repayment £242.47

35 further monthly repayments of £242.12

Total amount payable under this agreement £8716.67

APR 15.9%

What we are trying to work out is what this equates to in terms of headline rate - I'm guessing it is about 8% but I do not know how to do the arithmetic.

Well by my spreadsheet the interest rate is 15.9%...

Monthly rate = 1.159^(1/12) = 1.012372376

Hopefully it's attached if I do it right. Column C is what you owe at the end of the month. Goes to ~zero after 36 months. Didn;t do teh slightly different 1st month so it;s not 100%

loan.JPG

post-13257-1234990783_thumb.jpg

Edited by the primitive
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Sorry - incorrect terminology - I should have said early settlement figure.

So, if he refinances the early settlement balance of £6,600 at 8% he'll be quids in.

What would the monthly repayments on £6,600 over 36 months be?

Yes, take the bank debt at 8%. Assuming s/he refinances for 36 months, the repayments will be £206.80 per month.

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