LOC Repayments

[fATICAN]

Hi all,

Some of you may be helping me on another thread, and I will go to the bank about this...but does anyone know...

Say I have a LOC for eg $ 100,000 and the monthly payments are determined as being say $600...

If I draw $20,000 do I pay $600 or a portion of $600 ?

and 6 mths later If I draw another $30,000...is it $600 or just a bit more than

what I was paying for the $20,000?

What I'm trying to work out is if the monthly repayment changes as I draw down more and more.

I know it's a klutzy query but I'm a Bit confused with this...
cheers.

 

[Peter_Tersteeg]

In most cases with a line of credit, you pay interest on whatever is owing. The quick way to get an estimate of the monthly repayment is:

Amount Owing x Interest Rate% / 12 = Monthly Repayment

The more you draw down, the higher your repayments will become.

 

[THEHEATH]

In most cases with a line of credit, you pay interest on whatever is owing. The quick way to get an estimate of the monthly repayment is:

Amount Owing x Interest Rate% / 12 = Monthly Repayment

The more you draw down, the higher your repayments will become.

You know last time I had my repayments reduced when rates went down that is the calculation I used to estimate my repayments too. That's not how it worked out though, so I rang the bank and said what's the go, this is how I arrived at my repayment figure and his response was no no no that's not how it is worked out

 

[Bradsdad]

You know last time I had my repayments reduced when rates went down that is the calculation I used to estimate my repayments too. That's not how it worked out though, so I rang the bank and said what's the go, this is how I arrived at my repayment figure and his response was no no no that's not how it is worked out

Knowing who the lender is would help.

The calculation mentioned is usually a decent guide for most products out there. You need to remember that interest is usually calculated up until the last business day of the month. As such, interest could be charged on say 28 days 1 month but say 32 days the next month and 30 the next. This will lead to a variance most months even if your balance shows no movement.


Regards
Steve

 

[Peter_Tersteeg]

The calculation does have a small amount of error in it by default as it's assuming interest is calculated annually, not daily. It doesn't take into account how many days there are in a month either. There are some forumlae in Excel that will give more accurate results, but the above formula is generally what most people will use with a hand held calculator.

 

[katay4]

this is the same calculations i use as well and it is great to give you a rough idea... although if i am correct i believe this gives you the interest only repayment if your loan is set up as principal and interest you would need to use a different way to calculate..

 

[fATICAN]

Thanks all,

The Loc I have is a variable P & I with CBA.

I spoke to the bank and they are really just concerned with the Interest being paid...therefore there is no stated 'minimum' mthly payment...however if you didn't make a payment for a few months they'd be on to you....so, in fact.. if I cover the interest component @ 5.81% pa...this comes to (on $100000) @ $484 /mth...of course the capital isn't being reduced.
If I draw $20000 only... the interest is 5.81%pa on that amount..= $1162pa or $96 /mth
So, as I draw more ..the monthly repayment of Interest goes up eg $30000..=$1743pa or $145/mth

of course the more you chuck on per month the more you pay off the capital....done & dusted..thankyou all for your help.

cheeers