Secured Personal Loans

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.

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$0] 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.

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

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.

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.

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%. 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.

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