Help with working out interest repayments on a silly finance deal ...

[SillyDecisionMaker]

Having made a silly decision to buy windows on Finance (NEVER AGAIN) I am struggling to get my head around how the interest has been applied and wonder if you helpful folk can assist ...

the figures are

£4,900 Amount borrowed repayable over 96 months
£103.53 paid monthly
£103.53 x 96 = £9,938.88
Total repaid is 202% when we agreed 12.9% p.a!

How does that work?!

I know It was a silly mistake to make and it was sold to us under the guise of 'its cheaper than a credit card rate' .. please be gentle with the flamings for making such a bad decision...NEVER AGAIN!

I have the savings to pay it off which I am going to do but I wanted to check their calcs were correct first (hopeful!)

Thanks!

You're paying 12.9% of the total amount borrowed per year.

4900/100x12.9= 632.10 which is the interest payable per year.

632.10x8= 5038.88 which is the total interest you pay.

Plus that to the original 4900 equates the 9938.88 figure.

I think what you've probably misunderstood is that you are paying 12.9% interest per year of the total amount.

I know nothing of finance/banking/interest but that's what my quick calculations seemed to suggest.

1st year interest 4900 x 0.129 =632
Paid 1242
Less interest = 610 paid off capital
New balance owed = 4268
2nd year interest on 4268 x0.129 = 550
Paid 1242
Less interest = 682 paid off capital
New balance owed = 3586

etc

so over 8 years your interest payments could easily amount to 5k

The sums above show the basic maths. Depending on when the balance is adjusted affects the exact numbers - LIZS has demonstrated annual reduction. More common is monthly, and some (mortgages mainly) have the interest recalculated daily.

Are you too late to pull out of the deal? You get a certain number of days to get cold feet in many loans.

It might be cheaper to pay it all off from savings - they may reduce the interest payments, and its always cheaper to use savings than taking out a 12% interest rate (unless your getting more than that on your savings).

Google compound interest if you want an accurate description.

Thanks All, that makes sense! We are four years into it and they want £3,460 as the final settlement figure. I'm going to pay it off now. Lesson well and truly learnt! I'm usually quite sensible!

put the numbers into my credit card or mortgage spreadsheets ...
www.mumsnet.com/Talk/site_stuff/1715581-Cost-of-credit-cards-and-mortgages-the-spreadsheets?pg=2
then you can see how it works month by month