How does finance work ?

SBSP · Post by **SBSP** » 27 Feb 2008, 14:06

Anyone know anything about finance ?

I got finance frm standard bank at 20% intrst

and installments of R980 x 60 months
If i use online finance calculators from Wesbank, Absa and some Car site

I get to R754.

If i calculate 36000 rand i get to R980pm all on 60 months

The item is only 30 000 now i'm trying to find out where is the extra 6000 comming from ? can anyone help.

Service fee + registartion ? that cant be 6000 i phoned a different branch and they said service fees as in paperwork + registration is R1000

Samaya · Post by **Samaya** » 27 Feb 2008, 15:13

This not the exact way but it is something along the lines of: They give you a loan, R30000 (in your case), quote you 20% interest per year, The first year, if you only pay R6000 per year (example), you will have an outstanding balance of R24000, now they calculate interest on this amount again and gets added to your original amount. Now you owe say R28000. They calculate this when you take the loan. Hence you are paying R+-60000 (R980 * 60 month = R58800) for lending R30000.

Worst ever LEGAL ripoff.

WiK1d · Post by **WiK1d** » 27 Feb 2008, 15:18

Well, you seem quite right there SBSP. I did some maths, and it's something around there, you are in actuality paying about 80K for that 30K. I could show you the exact maths if you want to, and then you could ask the Finance Agents what the flip is going on

Website · Post by **hamin_aus** » 27 Feb 2008, 16:20

Compound interest is older than Christianity. Almost as old as money.

The only ripoff here was that your interest rate is 20%. Thats way too high!
The prime rate is currently 14.5%, so you should have aimed to get a rate of prime + 2% over 60 months

Did you shop around? Financial institutions are falling all over themselves to give out loans.

Friggs · Post by **Friggs** » 27 Feb 2008, 17:01

jamin_za wrote:The only ripoff here was that your interest rate is 20%. Thats way too high!
The prime rate is currently 14.5%, so you should have aimed to get a rate of prime + 2% over 60 months

Did you shop around? Financial institutions are falling all over themselves to give out loans.

I was told that they (finance houses) charge a higher interest rate on motor bikes (especially full off road) as they see it as a purely "pleasure" vehicle (even road bikes normally). I also heard that they charge higher interest on anything from R30 000 and under for some or other reason.

Website · Post by **hamin_aus** » 27 Feb 2008, 17:03

Oh, he bought a bike....

SBSP · Post by **SBSP** » 28 Feb 2008, 07:29

Thanks Friggs

Thats what the bank also said. theres a word for it lezure vehicle or something.

Cure · Post by **Cure** » 28 Feb 2008, 07:40

Well a bank is trying to make money and if they worked on a 1:1 ratio when it came to lending they would make any money. Everyone does it, not just banks for example when you buy something with a monthly payment plan you also end up paying a lot more.

SBSP · Post by **SBSP** » 28 Feb 2008, 08:17

Well a bank is trying to make money and if they worked on a 1:1 ratio when it came to lending they would make any money. Everyone

LOL The Sun is shining!!!! I know so , cus i can see so.

Everyone knows that.

Read the first post again.

naughty · Post by **naughty** » 03 Mar 2008, 09:58

20% - ouch - last time i got quoted on a vehicle i was offered prime minus 4% if i foregoed any discount on the vehicle

but that wasnt for a bike though - interest rates on bikes seem hectic

Website · Post by **hamin_aus** » 03 Mar 2008, 10:47

viceroy · Post by **viceroy** » 03 Mar 2008, 13:31

SBSP wrote:Anyone know anything about finance ?

I got finance frm standard bank at 20% intrst

and installments of R980 x 60 months
If i use online finance calculators from Wesbank, Absa and some Car site

I get to R754.

If i calculate 36000 rand i get to R980pm all on 60 months

The item is only 30 000 now i'm trying to find out where is the extra 6000 comming from ? can anyone help.

Service fee + registartion ? that cant be 6000 i phoned a different branch and they said service fees as in paperwork + registration is R1000

Is this the first loan you've ever taken out?

If so that might explain the high interest rate.

Just one thing you might be interested in...

With a motor vehicle loan, the interest is all calculated up front, so the loan total they tell you is what you pay. Sometimes if you want to settle early, they'll recalculate what you owe at that time and that is your settlement, but not always...sometimes they even impose penalties.

If you're able, and I know there are few people who can do this, but it's often a better deal to use your homeloan to buy a car. Firstly the interest is calculated monthly (unlike the car loan which is preloaded) so you can sell early and not make a huge loss (it's even better if you pay cash), the interest rates are usually better. and you can set the term of the deal, even though shorter periods are always better than longer....just don't get sucked into the trap where you're paying the car off over 10 years...doing that and the interest goes up like you can't believe even though your monthly payments are lower.

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How does finance work ?

How does finance work ?

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