Secured Personal Loans

I am about to take out a secured personal loan, with a small finance
company in the UK, and I need help in calculating some figures with
regard to the loan.
The loan is for =A337500, APR 13.6% variable, 240 monthly instalments of
=A3435.48, the interest rate is 12.0% a year, broker fee =A32000 and
legal fee =A350.

Now if I pay the monthly instalment for 2 or 3 years and then want to
settle the entire loan, can anyone tell me how much I will be paying
back?

How do these figures match up in simple calculation?

Do the figures with regard to the loan seem fair? (disregarding my
personal reasons for taking the loan, considering will you take it?)

I will also be glad to know what the diffrence is btw the APR and
Interest Rate quoted above and what exactly they mean.

And other peoples experience with regard to secured personal loans, by
this I mean problems come across with small and large secure loan
companies.

Re: Secured Personal Loans

Bee wrote:

> I am about to take out a secured personal loan, with a small finance
> company in the UK, and I need help in calculating some figures with
> regard to the loan.
> The loan is for £37500, APR 13.6% variable, 240 monthly instalments of
> £435.48, the interest rate is 12.0% a year, broker fee £2000 and
> legal fee £50.

The figures suggest that the fees are added to the loan, i.e. you
actually borrow £39550, of which they keep £2050 and give you £37500.

> Now if I pay the monthly instalment for 2 or 3 years and then want to
> settle the entire loan, can anyone tell me how much I will be paying
> back?

That depends on the terms of the agreement. I would think that the
fees are non-returnable, so assuming the 1% a month rate stays the
same, chances are the amount you will owe after 36 months would be
£39550 * (1-1.01^-204)/(1-1.01^-240) [because 204+36=240]
which is about £37828.

It will seem harsh to you that, having paid 36*£435.48, you still owe
more that you "really" borrowed. But of course you are borrowing
£2050 of fees on top. Just interest alone on £39550 amounts to
£395.50 per month, so at first you're reducing the balance by only
some £40 per month.

> How do these figures match up in simple calculation?

They seem correct.
The payments are calculated as £39550 * 0.01 / (1 - 1.01^-240)

> Do the figures with regard to the loan seem fair? (disregarding my
> personal reasons for taking the loan, considering will you take it?)

It strikes me as an excessively high interest rate for a secured loan.
Most people can get unsecured for that. The legal fee for doing the
actual securing looks OK, but the £2000 broker's fee seems excessive.

> I will also be glad to know what the diffrence is btw the APR and
> Interest Rate quoted above and what exactly they mean.

12% nominal per year means 1% per month.

This is equivalent, by compounding, to 12.68% per year.

The APR is higher because it relates the repayments to the net
borrowing (£37500) instead of the "gross" borrowing (£39950).
In other words, the APR is the result of compounding that monthly
rate r for which £435.48 = £37500 * r / (1 - (1+r)^-240). The
r in question is 1.069457%, which makes the APR 13.61592% before
rounding.

Re: Secured Personal Loans

Thanks Ronald you've been of great help. After further discussion with
the loan company today they have agreed to reduce the brokers fee by
=A31000, and the APR to 13.2%. I still think the fee and APR are
excesive, but considering my options for now, the monthly payment will
now be just over =A3420.00. Will keep you posted.

Re: Secured Personal Loans

>"Bee" <> wrote in message
>news:
>Thanks Ronald you've been of great help. After further discussion with
>the loan company today they have agreed to reduce the brokers fee by
>£1000, and the APR to 13.2%.

They aren't reducing the APR, it reduces by itself because
something else reduces.

In this case it's probably because the fee is used as part of the
calculation and reducing the fee reduces the APR.

tim


>I still think the fee and APR are
>excesive, but considering my options for now, the monthly payment will
>now be just over £420.00. Will keep you posted.