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## Interest Explained

Halton Credit Union uses APR (Annual Percentage Rate), which is charged on a reducing balance basis. This is a very a affordable way to borrow money.

This means that interest is charged on the balance of your loan outstanding at the time you make a payment, and not the amount you borrowed. This is the reason, why if you pay more than you agreed, you will pay less interest. But if you miss payments, you will pay more interest.

Below you will see an example of how interest is calculated and charged to an account. Firstly, we'll show you how you can calculate the interest you will be charged on your loan.

((Balance Outstanding/365days)*APR%)*Number of days since previous payment or loan allocation = interest payable.

We will use a £100 loan, charged at 19.6%APR paid every 7 days (weekly). Interest is rounded to the nearest whole pence.

LOAN ALLOCATED | £100.00 |

Interest Calculation ((100/365)*19.6%)*7 |
£0.38 |

Payment | (£10.00) |

Balance Outstanding | £90.38 |

Interest Calculation ((90.38/365)*19.6%)*7 |
£0.34 |

Payment | (£10.00) |

Balance Outstanding | £80.72 |

Interest Calculation ((80.72/365)*19.6%)*7 |
£0.30 |

Payment | (£10.00) |

Balance Outstanding | £71.02 |

Interest Calculation ((71.02/365)*19.6%)*7 |
£0.27 |

Payment | (£10.00) |

Balance Outstanding | £61.29 |

Interest Calculation ((61.29/365)*19.6%)*7 |
£0.23 |

Payment | (£10.00) |

Balance Outstanding | £51.52 |

Interest Calculation ((51.52/365)*19.6%)*7 |
£0.19 |

Payment | (£10.00) |

Balance Outstanding | £41.71 |

Interest Calculation ((41.71/365)*19.6%)*7 |
£0.16 |

Payment | (£10.00) |

Balance Outstanding | £31.87 |

Interest Calculation ((31.87/365)*19.6%)*7 |
£0.12 |

Payment | (£10.00) |

Balance Outstanding | £21.99 |

Interest Calculation ((21.99/365)*19.6%)*7 |
£0.08 |

Payment | (£10.00) |

Balance Outstanding | £12.08 |

Interest Caluclation ((12.08/365)*19.6%)*7 |
£0.05 |

Payment | (£10.00) |

Balance Outstanding | £2.13 |

Interest Calculation ((2.13/365)*19.6%)*7 |
£0.01 |

Payment | (£2.14) |

Balance Outstanding | £0.00 |

This is how all reducing balance loans work, the interest is charged on the Balance Outstanding, and not the original loan amount.

From this we can see that this loan would only be paid for 11 weeks, before it was cleared. The total interest payable here would be £4.83, less than £5.00 to borrow £100. If this loan was taken over 1 year, and paid monthly, the total interest would be £10.88.

As a rule of thumb, if you're wondering how much a share based loan would cost from Halton Credit Union, and you don't want to do all this calculation as simple way is to think that you'd pay £11 per £100 borrowed, per year.

If you borrowed £500.00 over 1 year, you'd pay around £55 in interest, total repayable £555.00, **that would be over £350 less than some doorstep lenders.**

Halton Credit Union Limited.

Registered Office: 115-116 Runcorn Shopping Centre, Runcorn, Cheshire, WA7 2BY.

Tel:01928 790571

Widnes Office: 27 Queens Avenue, Widnes, Cheshire, WA8 8HR.

Tel:0151 257 8753

info@haltoncu.co.uk

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registration Number: 213805.