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I'm thick when it comes to finances. I don't understand how interest and compound interest works, so I'm seeking help.

I have a Virgin Money Transfer principal balance of £ 5,816.21.

  • Interest rate is at 23.29%
  • Interest is variable.
  • Balance opened at £8000 on February 2020.
  • I've been paying the minimum balance only since, due to financial constraints.

My minimum monthly payment this month was £175.34

  • Paid on 15/03/2022
  • Interest was £104.08

My next requested minimum payment is £161.20, on 14/04/2022

My estimated interest for that payment is £113.70

The statement also explains that interest is charged on the total value of the statement, not just the outstanding balance (side question, what?)

By paying a grand total of £675.34 a month (including the minimum and an additional payment on the 30th of each month) I estimate I will pay this balance off by February 2023, with the final additional payment being £703.51

How far off am I?

Is there any more information you need in order to help me calculate the date I can pay this thing off?

Any insight here would be greatly appreciated.

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2 Answers 2

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There are several "monthly payment calculators" out there that can give you the answer - here's one that tells you it will be paid off in 9-10 months, and also shows you the payment breakdown:

https://www.calculator.net/payment-calculator.html?ctype=fixpay&cloanamount=5816.21&cloanterm=15&cmonthlypay=675.34&cinterestrate=23.29&printit=0&x=77&y=8

The numbers are in dollars, but it doesn't matter. The only catch is that with a variable interest rate, the rate could change before you pay it off, but with that high a payment amount (relative to the interest), the interest rate doesn't make a huge difference.

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    Thanks! Looks like my predications weren't too far off. I forgot to lower the interest costs as the principal balance dropped throughout the months, which had my payment estimation last into February.
    – Guest
    Apr 1, 2022 at 15:22
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If the interest rate doesn't change you will have to make 8 more payments with the last payment being £643.45.

Even if the interest rate does change the impact will be minor. Probably still 8 payments and only the amount of the last one will go up or down. At 25% your last payment would be £672 at 21% it would be £604.

This is a terribly expensive loan. You should pay it off as quickly as possible or try to refinance with someone more reasonable

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  • Thanks! I'm looking forward to getting rid of this debt. It sure is expensive. It's a money transfer, and I couldn't pay the balance off before the promotional period ended (18 months) so that's why the costs are so high.
    – Guest
    Apr 1, 2022 at 15:24

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