Confused on Interest being charged

[Anonymous]

Hey everyone,

I  currently have a Line of Credit with Nasa FCU at 9.5%. I also have a balance of around 11,500 on it. I just made my first payment for the year and it said I was charged 149.33 in interest. Am I calculating it wrong or does the interest charged seem like too much? From what I understand 9.5% of 11,500 comes out to 1092.50 a year, which would be around 91 dollars month. So where is the extra 58 dollars coming from?

I don't want to ask NasaFCU unless I have to cause it always feels like poking a sleeping dragon when you call your lender.

Thanks in advance.

[DeeBee78]

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@Anonymous wrote:

Hey everyone,

I  currently have a Line of Credit with Nasa FCU at 9.5%. I also have a balance of around 11,500 on it. I just made my first payment for the year and it said I was charged 149.33 in interest. Am I calculating it wrong or does the interest charged seem like too much? From what I understand 9.5% of 11,500 comes out to 1092.50 a year, which would be around 91 dollars month. So where is the extra 58 dollars coming from?

I don't want to ask NasaFCU unless I have to cause it always feels like poking a sleeping dragon when you call your lender.

Thanks in advance.

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Is there an annual fee on your LOC? I got $91.04 as your expected interest payment. 

[DrZoidberg]

You say this is your first payment, how long has the loan been open before your first payment? 

[ddemari]

is that taking into consideration that advances from a line of credit are treated as a cash advance and interest starts piling on from the get go? or maybe its different with that bank. 

[NRB525]

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@DrZoidberg wrote:

You say this is your first payment, how long has the loan been open before your first payment? 

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+1

It's this. When my CU PLOC started out, it took them a couple of months to get the interest charges started, whereupon it caught up the "no interest charged" months.

[Anonymous]

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@Anonymous wrote:

Hey everyone,

I  currently have a Line of Credit with Nasa FCU at 9.5%. I also have a balance of around 11,500 on it. I just made my first payment for the year and it said I was charged 149.33 in interest. Am I calculating it wrong or does the interest charged seem like too much? From what I understand 9.5% of 11,500 comes out to 1092.50 a year, which would be around 91 dollars month. So where is the extra 58 dollars coming from?

I don't want to ask NasaFCU unless I have to cause it always feels like poking a sleeping dragon when you call your lender.

Thanks in advance.

---

A couple of things to take into account. FIrst, what is the period for the interest charge? One year? Second, interest is periodically compounded. 10% APR is more than 10% interest per year. This is why taking a loan for 10% means more than paying 10% per year in interest. The period over which the interest is being compounded (daily, monthly, yearly) makes a difference in the total interest paid. Three, did you have any other fees and the like that you had to pay (like a one time fee when the line of credit is pulled or a late fee?). 

Whle all the above points I made might be relevant, the most important one to understand that 9.5% APR is not 9.5% interest per year. It is the annual percentage rate. If 9.5% APR was compounded every second, your interest rate would likely be in the thousands of percent. A monthly compounding period or a daily compounding period is much more common and the period over which interest is being compounded has a significant impact on the true amount of interest you pay. While no one is compounding interest every second (probably would create legal issues), understanding that even with normal APR terms the interest you pay is more than the interest rate listed due to compound interest is important to understand. We don't get simple interest loans. 

[Anonymous]

Well the product is a Cashline Unsecured Line of Credit. There's no fees attached to it. Also It's my first payment I had this year, but not my first payment. I've had it for a couple of months and the interest was significantly lower last year. The only difference is that I took some money out this month for an emergency. All I know is there's no fees, APR is %9.5 and interest accrues the second the money is taken out. But from my understanding it doesn't accrue daily, it only ignores the 30 day no interest period.

[OmarGB9]

Interest accrues daily, from the day you take the money out.

[NRB525]

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@Anonymous wrote:

Hey everyone,

I  currently have a Line of Credit with Nasa FCU at 9.5%. I also have a balance of around 11,500 on it. I just made my first payment for the year and it said I was charged 149.33 in interest. Am I calculating it wrong or does the interest charged seem like too much? From what I understand 9.5% of 11,500 comes out to 1092.50 a year, which would be around 91 dollars month. So where is the extra 58 dollars coming from?

I don't want to ask NasaFCU unless I have to cause it always feels like poking a sleeping dragon when you call your lender.

Thanks in advance.

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Ok, well since it's an ongoing account, how many payments have you made? Was there any delay in the first interest charge, and did that fully catch up the calculation of early interest?

What is the history of the balance amount open? Can you list out the key days with the balance, such as November 1, 2015 balance, the balance on December 1, then the day you took a draw, what the balance became on that day, when your monthly payment (or payments) posted what the balance became on those days.

Also what was the interest billing on your December statement, and what was the balance on that statement?

The interest charge does seem high. Even compounding daily, 9.5% would turn into 9.96% (for the simplified calculation) so it only raises the estimated interest for the month by a few dollars, not 50.

You can use an Excel formula to see what the estimated annual interest rate is, from a daily compounding interest rate:

=((1+(e80/365))^365)-1 where e80 is the cell reference to the APR that is compunding daily.

[takeshi74]

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@Anonymous wrote:

But from my understanding it doesn't accrue daily, it only ignores the 30 day no interest period.

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What's this understanding based on?  What do your terms state?  They don't seem to have them published on their site.

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@Anonymous wrote:

I don't want to ask NasaFCU unless I have to cause it always feels like poking a sleeping dragon when you call your lender.

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It would be the most straightforward way of getting the answer.  Do you actually have a reason to fear AA or is this just general fear?