Late 2021 I lent some money to an acquaintance who was using it to buy some land and develop a few properties. Due diligence was assumed...legal contracts drawn up etc etc and a charge on the land in my name.
A substantial tranche of the loan is now being repaid, plus interest which was very favourable for me. I trust the person but would like to confirm that the interest payment is correct...my back of an envelope calculations differ from that quoted. And not in my favour :-)
I’ve looked online to find a website where I can input the initial financial amount, the interest rate calculated daily, and when the loan transfer was made from my bank. To no avail.
Can anyone point me in the right direction please. Much appreciated.
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Give me the interest rate, time (days) and I will tell you the interest on say £1,000
You can then multiply the amount by the loan amount
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Is it Simple interest or Compound interest?
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Many thanks FB....>> Give me the interest rate, time (days) and I will tell you the interest on
>> say £1,000
>> You can then multiply the amount by the loan amount
>>
Some misinformation in my original post, in which I said “interest rate calculated daily”.
It’s a fixed rate of 8% for the full term of the loan, and the first tranche, with interest, is due to be repaid after 940 days.
It was a small brownfield site and the residential development has taken longer than expected, but that’s ok, I’ve had no major financial outgoings since I made the loan, apart from a privately funded hip replacement. At the moment I don’t know if tax will be deducted at source or if I’ll have to resume tax returns for HMRC. Don’t suppose there’s any way out of paying 20% tax on the interest :-(
The contract states “ The loan will carry interest at the rate of 8 per cent per annum from the date of drawdown until repayment on a pro rata basis”, so I’m assuming Simple Interest rather than Compound. I probably clarified that back in 2021 but cannot find any note I made at the time.
Appreciated
Last edited by: legacylad on Tue 12 Mar 24 at 10:42
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940 days at 8% flat is 20.6%
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The difference might be in how you are calculating the interest simple or compound, daily, weekly, monthly or yearly? Assuming the interest was compounded and at a fixed rate, then the calc for repayment value is loan amount x 1.y^n where y is the interest (fractional per period) and n the number of (periods - days / weeks / months etc). e.g. if you lent £10k @ 5% per annum interest for 900 days compounded annually, then the calc would be 10000 x 1.05^2.47 = 11280.74. If it was compounded daily, then the calc is 10000 x 1.00013699^900 = 11312.04, if it was simple interest then it is 10000 + 10000*0.05*2.47 = 11235.
Last edited by: RichardW on Mon 11 Mar 24 at 16:29
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That’s just taken me back fifty five years to school.
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I was going to offer too but in his post LL says interest rate calculated daily so I took that to mean a look up and adjustment to base rates or suchlike.
If it's just a fixed rate to be applied daily that's not so tricky.
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>> That’s just taken me back fifty five years to school.
>>
I sat my O level Maths four times. Failed miserably and gave up in disgust. Basic sums and arithmetic I can do, a long time in retail means I can still add up the cost of say a dozen items in my head when doing a grocery shop.
I’m good at geography though :-)
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"That's just taken me back fifty five years to school."
It appears we have some similar life experiences although it only took 3 goes at O level. Although looking at RichardW's contribution I'm not surprised :). Also good at geography.
Last edited by: Fullchat on Tue 12 Mar 24 at 17:29
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Funny how some people 'get' numbers and others don't! I'm definitely in the get camp - Maths and Further Maths at A Level, and an Engineering degree, and 25+ years so far as a design engineer - I do a lot of sums, although most of it just simple arithmetic - the complex maths we go to at degree level was getting a bit mind bending - 3rd order partial differentials anyone?
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>>3rd order partial differentials anyone?
Differential calculus I understood, but never got my head totally around integration and never had any cause to use it.
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- the complex maths we go to at degree level
>> was getting a bit mind bending - 3rd order partial differentials anyone?
>>
I doff my cap to you :-)
My favourite subjects at school were geography, English Literature probably because I was surrounded by books at home , and Economic History.
Maths, physics, chemistry were a complete mystery. I enjoyed French at school and still get by with it, as I have too on occasion when driving across Spain and I encounter off the beaten track places where no English is spoken. And my Spanish is pitiful...I should attend classes in Spain but don’t have the time.
I wonder if it’s the way we are wired ?
Last edited by: legacylad on Wed 13 Mar 24 at 11:19
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2 of my brothers & I went to university in the 50s & 60s .
We were "good at Maths" in school but never near the standard to do Pure Maths/Physics at University. The people I knew who did maths/maths & physics /physics are all on the Spectrum bar say 2.
My 3 sons were likewise "good at Maths" they did engineering - 2 x 1sts in Chem Eng.
Eldest granddaughter did well at school Maths A* but this was due to being a hard worker + 2 hours per week tuition from me.
Eldest grandson had ambitions of doing Pure Maths, will probably get an A* but is slowly realising engineering might be a better bet -follow his dad?
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As child/teenager I was, with hindsight, frightened of number.
Maths O level took three attempts though I ended up with a B.
Balancing the books at the end of the day in my first job was an ordeal. The boss had the skill to add up a column of figures by the simple expedient of running a pencil down them!! Was contemptuous of my use of an adding machine.
Confidence grew later and by my mid twenties I was entirely happy doing account reconstructions with daily or monthly interest and showing how it accumulated when the 'system' ran interest.
A room and space of my own to think after being promoted to HEO helped. I had an I can do this revelation when the computer messed up tax on a pension system the Public Trustee administered and I could see how the system used 'constants' across the various tax rates - this was just before Lawson reduced multiple rates to two or three.
In reality it's all not much more than arithmetic. I've not used proper maths like quadratic equations or trig since I was 17. Pythagoras maybe occasionally.
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Google and Wikipedia are now your best friends..
We no longer need to know how to do complex mathematics.
We just need to know an answer exists and where to find a reliable source.
The same is true of just about all subjects. My 10 year old granddaughter knew five years ago that Alexa was the fount of all knowledge - from questions like "do spiders poo" to the "capital city of Nicaragua".
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IMO what would be easiest for you is to apply a daily rate that equates to an effective annual rate of 8% (like the APR calculation)
The daily rate for 8% p.a. for practical purposes is 0.0002108744 or 0.02108744%.
So if you have a loan amount, and a number of days that balance is outstanding, then the interest accrued would be
(loan amount)*(1+0.0002108744)^(days)-(loan amount)
Example, if he has owed you £100,000 for 365 days then
(100000)*(1+0.0002108744)^(365)-(100000)
You don't need higher maths, if you paste the line above into google it will calculate the answer of £8,000.
So for 940 on £100,000 days it would be
(100000)*(1+0.0002108744)^(940)-(100000) = 21920.75
Re the simple/compound thing, you can see that year one is exactly 8% 'simple' but the interest is logically compounded annually if that is the frequency you add interest at - because the loan amount has increased by the year's interest unless he pays you the interest annually. In the absence of anything more explicit, I can't see how you would interpret the agreement otherwise.
I have laid down my calculator now, but I always used to put examples in contracts to avoid possible arguments later.
You can break it into annual stages if you want i.e.
First year, balance £100,000, Interest = £8000, balance at end of year £108000
Second year, balance £108,000, Interest = £8640, blance at end of year £116,640
210 days, balance £116,640, Interest = £5280.75, amount to repay £121920.75.
It's easier with a spreadsheet or one of the below which I use but the google calculator does it easily enough if you type carefully and check it!
www.amazon.co.uk/HP-113394-12C-Platinum-Calculator/dp/B00009WNV9
E&OE
Last edited by: Manatee on Wed 13 Mar 24 at 12:29
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I recall that when I entered O level maths I became 'lost' after the first few sessions for some reason and the rest just became more and more difficult. Poor teaching practices.
I took this into my teaching career later in life and ensured that each and everyone of my students fully understood the content of the lessons and encouraged them to see me if there were areas they didn't understand and I would deal with them one to one. It was all 'chalk and talk' in those days.
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ISTR we did "New Maths" (poss around 1967). I've no idea what was different.
Maybe I'd have done better on Old Maths!!
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>> IMO what would be easiest for you is to apply a daily rate that equates
>> to an effective annual rate of 8% (like the APR calculation)
>>
>> The daily rate for 8% p.a. for practical purposes is 0.0002108744 or 0.02108744%.
>>
>> E&OE
>>
Thanks
I’ll put in my figures tomorrow and see the result
What is this symbol ^ ?
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^ means "raised to the power of" i.e. 2 squared would be written 2^2
Root 2 would be written 2^(1/2)
Normal for writing formulas in spreadsheets and google understands it.
Incidentally I'm planning 2 trips to KL this year. Kirkby Lonsdale in May, and Kuala Lumpur in Oct:)
Last edited by: Manatee on Thu 14 Mar 24 at 20:57
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>> Incidentally I'm planning 2 trips to KL this year. Kirkby Lonsdale in May, and Kuala
>> Lumpur in Oct:)
>>
Thanks for the explanation.
We have a monthly trip to KL...11:30 bus, time for a couple in the Royal Barn ( KL brewery Devils Bridge is one of my very favourite beers) then a 4 minute walk to the Orange Tree for lunch. Monday > Thursday 12-2 it’s home made chilli & chips or lovely Honey roast ham & egg. Both £7.95. Friday it’s beer battered haddock & chips, again £7.95.
Don’t forget to pick up a loyalty card at the Barn. 9 stamps and get your 10th pint free, plus you get Camra discount so win win. The OT is same owner so get your card stamped there also.
Kings Arms pub was a great place, lovely inglenook fireplace and seating ourside at rear. Sadly it changed hands, beer selection became awful and prices rocketed. Now on our banned list.
Call and see Steve & Elaine at the Old Manor House ( previously the Bunkbarn)in Clapham. Used to run Bar13 in Settle...they’ve taken it over recently. Lovely friendly small pub which they are doing up gradually. Food at some point in future. Usually lots of Settle folk there using the bus to get home after walking over ( takes 1hr 45m) we leave KL mid afternoon, catch the bus back and stop off for a couple before the last bus home from Clapham at 17:20
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Thanks, you could write the lonely planet guide!
We'll be passing through at some point. We have a tour planned, visits in the West Riding, N Yorks, a bit of Scotland, NI, Lakes, Northumberland, East Yorkshire then home.
The other one is tangential to a friend who lives on that side of the world having a wedding in Bali. The boss saw her chance, it's not a holiday destination I would have normally have chosen but I'm sure it will be fun anyway.
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Interest calculation - Falkirk Bairn
