Sorry if this is a painfully obvious question. but I have to ask it anyway. When you have an interest rate rise how do you recalculate your wrapee’s loan repayment so the loan will be paid out in the period set.
GavinWallFlowerMember@wallflowerJoin Date: 2004Post Count: 205
Gosh I don’t know ,how about…
Take away the amount he/she has already paid from your agreed value then plug in that number into your EXCEL spreadsheet,(with the new interest rate) that you had set up in the first place and away you go…
See told you i didn’t know, just wanted to get more posts than you[grad]Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Depends on the termns of your installment contract.
If the interest rate shown on your contract is a variable rate one and the Special Conditions allow for increases then simply YES. Recalculate and advise the wrappee of the new repayment.
If it is a fixed rate then NO. Lets hope if you have offered this option then you have fixed your own rate of interest.
richard at fhog.com.au
There is no such thing as a problem.
Just a solution waiting to be foundFWMember@fwJoin Date: 2002Post Count: 478
I just look at the whole loan and calculate what the payment would have been from the start at the new interest rate. This is then the new payment.
If I understand you correctly, my wrapee owed $32,000 at the start of her loan over 25yrs at a rate of 8.56% which worked out at $119.05 per fortnight. 1 yr on and she currently owes $30,786.36 and after the interest rise she is getting charged 9.07%. So you would work out the repayments on the loan of $32,000 at 9.07% over 25 yrs = $124.17 per fortnight.
Is this correct?
Thanks Gavinlozza123Member@lozza123Join Date: 2003Post Count: 81
I would have thought you just base it on the balance owing x new rate x no. of years remaining. Is that not correct?
* Also – quick question — if you have fixed the rate for your wrappees (based on the fixed rate you can currently get, plus say 2%) are you then required to fix your rate too, or can you leave yours variable?
Lozza [biggrin]Modo Project BuildersParticipant@richardcasleyJoin Date: 2004Post Count: 2siacciMember@siacciJoin Date: 2003Post Count: 53
I do the calculation on the original loan amount not the amount owing also. Thats how the bank does mine to them so thats how I do it for my wrap clients.
DaveFWMember@fwJoin Date: 2002Post Count: 478
Yes, Gavin, that’s how it works. It’s a heck of a lot simpler than trying to calculate exactly how much time remaining etc.