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cashdesk

Formula for calculating interest

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Hi,

 

I have a feeling that the interest rates I have on a Barclays First Plus loan are not what they seem and was wondering if anyon knew the formula for calculating interest on a day by day basis so that I can see if the rates they use are the rates they inform me of.

 

My credit agreement shows an APR of 9.4%, and AER of 9.4% and a MIR of .754%. However, having sent them a SAR the documents they sent back show that at set up, the APR and AER were 10.4% and the MIR was .831%. At no time in the 5.5 years I have had the loan have I ever recieved a letter informing me of a rate of 10.4%.

 

I have a breakdown of all the payments made and the dates at which rate changes were applied, so if I have the formula to calculate the amount I should be paying I will be able to see if they were applying the correct rate.

 

Thanks in advance.

Edited by cashdesk

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Hi Cashdesk,

 

Have a read at Link No6 in my signature below - Steven's Interest Tutorial.

 

:)


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Thanks, Slick. I will try to get my head around this.

 

I am not sure which calculation to use at the moment. I have a MIR of .754 and APR of 9.4, but if I divide 9.4 by 12 months, it gives me .788, not .754. I guess I'll get it one day.

 

Thanks again.

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Haha, If only it were that simple.

 

The difference will be because the interest is calculated throughout the year, ie it is compounded. So a monthly interest rate cannot be simply multiplied by 12 to give an annual rate.

 

Nor does it work backwards, eg 24% APR does not equate to 2% per month.

 

Check out the link to DualCalc in the Tutorial.


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Please give something if you can. We all give our time free of charge but the site has bills to pay.

 

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Hi cashdesk

 

To convert 0.754% MIR to APR:

 

((1 + 0.00754)^12) - 1 = 0.094 = 9.4%

 

best regards

hacksaw


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