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Post Info TOPIC: HELP how do interest rates work please
rachel_mclean


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HELP how do interest rates work please
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Hi I should know this but I'm really not sure

I want to take out the 24+ advanced learning loan but before I start I just want to get my head around the interest rates on the loan

 

So whilst I am studying the rate is 3% plus the rate of inflation, after this if I am reaning under 20,000 it's 3%

so if I take out a loan of £1,000 say will the rate of interest be £30 per year (with just the 3%) 

Thanks in advance for your help

Rachel



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Rachel
Shamus


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It sounds as though the interest applied whilst learning is 3% plus inflation rate of 3 to 4% (lets call it 3%) so actual interest of 6%.

That is going to be compound so the interest will keep adding to the loan until you start repaying it.

Lets say 1k loan, end of year 1 you owe 1060, end of years 2 (assuming no further advance and no payment) £1123.60, etc. etc. until you start paying it off when the interest rate is reduced to the 3% as an incentive for you to pay it.

Imagine someone that borrows 1k and doesn't earn enough to start repayment for 10 years... By that time they would owe £1790.85 (assuming inflation remains constant).

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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
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