how do you calculate APR and interest rates

[govtepe1]

Hello as you can see my maths is rubbish , but couple of days ago I found a old credit agreement and found a APR calculator on the internet. when I calculated the apr against my borrowings it was very different to my CCA agreement . the banks calculations was lot more. does this mean I can sue them.

 

I want to calculate it my self rather then internet, how do I do it please help, this is because if my calculations comes back different , I am going to challenged the bank. many thanks

[Beemer325]

As a general rule of thumb take the APR and divide by 2 this should give you roughly the base rate. You need to then multiply the base rate by the number of years you have borrowed the money over.

 

example

 

£5000 over 3 years @ 7.9% apr

 

7.9 divide by 2 = 3.95 x 3 = 11.85

 

£5000 x 11.85% = £592.50

 

So total repayable is £5592.50 divide by 36 monthy payments = £155.35

 

Hope this helps

[govtepe1]

than you thats great i am going to calculate it now will tell you if there is any difference thankssss

[govtepe1]

I calculated as you said got a totally different figure from the banks calculations this is what I got.

for a loan of 10000 over 7 years on 15.9 APR

 

I got from my calculations

15.9 divided by 2 = 7.95

7.95 x 7= 55.65

10000 x 55.65 = 556.50

10556.50 x 84 = 125 per month

 

this is what was written on the agreement by the bank

APR 15.9

Ammount of loan = 10000

total charge for credit = 6197.72

monthly payments = 192.83

number of repayments = 84

 

does that mean they ripped me off ?

[Beemer325]

I think you have miscalculated somewhere

 

15.9 / 2 = 7.95 x 7 = 55.65

 

£10000 x 55.65% = £5650

 

Total cost = £15650 / 84 = £186.31

 

I hope this puts your mind at rest

[govtepe1]

your calculations are right but the banks one but again they have charged me £547.72 am I correct .

Does this mean they have breach their agreement by charging me wrong figure ?

[govtepe1]

sorry I ment they have charged me £547.72 more

[Beemer325]

As I said in my original post the rule of thumb is divide the apr by 2. this does vary a little either way depending on the institution you use.

The other thing you could check is if they have charged you for insurance, sometimes they include it as standard and you have to decline it.

[govtepe1]

yeah I did ask them if I had PPI they said no . and I did decline it

[Beemer325]

I have posted a link to an online calculator and this one shows more or less what the bank charged you. You could try different ones and get different results.

So to answer your original question i.e have you been ripped off. I don't believe you have.

Sorry if that's not what you want to hear.

 

Loan Calculator, Loans Calculator, Loan Payment Calculator?

[ReasonableRon]

When did you take the agreement out? If it is after May 2005 it shoudl also actually show the flat (annual) rate. If so then you can easily work out whether the interest is correct, using the method already posted.

 

The banks figures suggest the flat rate is 8.85%, but this could also depent on if there are any fees included in the total amount payable, which would form part of the APR calculation but would not be included in the flat rate.

[govtepe1]

I took out the loan 24 january 2005

[govtepe1]

soon as I am aware there sould not be any other charges unless they have charged me for setting up the loan with out telling me

[gyzmo]

The formula is contained in legislation. However a person at uni with a degree involving complex maths was beaten by it. whether it is appropriate to use that I dont know.

 

I believe the CAB can calculate interest for you.

[dcdubbs]

THe APR formula calculation is extremely difficult- you're best bet is to use an online mortgage calc.

if you're bold here is how to do it:

WikiAnswers - What is the formula for calculating APR

 

As far as what is an what is

not included in the calculation (i.e a home appraisal or title search is not included)

 

here is a pretty solid list: What is and is not included when calculating APR?