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What is a retained interest loan?

A retained interest loan is a facility where the interest charges for the full term of the loan is deducted from the loan facility. Most bridging loans are calculated using this retained interest method.

However, the vast majority of the bridging loans that we arrange, are based on Roll Up Interest.

Retained Interest Loan Calculator

How does a retained interest loan work?

The best way to explain this is with a simple example:

If you were to borrow a £100,000 over 12 months, with interest charged at 1% per month on a retained interest basis, you would simply receive a sum of £88,000 and would be expected to pay back £100,000 in 12 months time.

Loan facility £100,000

Interest charged at 1% per month is £1,000

12 months x £1,000 - £12,000

Loan facility of £100,000 less £12,000 for interest means a net loan of £88,000.

If you require a loan facility of £100,000 net in your hand for 12 months at 1% per month, then you will require a gross loan facility of £113,636.

Any facility fee or broker fee is also deducted, reducing the net loan amount further.

Many bridging lenders calculate their interest charges using this method.


How to use our retained interest loan calculator

  1. Enter the amount of money that you would like to borrow in the loan amount box.

  2. Then select ‘Net’ if this is the amount that you wish to receive in your hand, or in other words, after interest or any other charges have been deducted.

    Alternatively select ‘Gross’ if this is the total facility that you require. From this amount any interest charges, together with facility fee and broker fee, will be deducted.

  3. Next enter the term of the loan, the monthly rate of interest and any facility or broker fees, expressed as a percentage of the gross loan amount.

  4. The box marked ‘Early Redemption’ is so that you can enter the month that you might clear the loan in. This will provide an estimate of the redemption figure if the loan is redeemed early (at the end of the month selected).

The calculator will then provide a breakdown of fees, interest charges, net and gross loan amounts, and finally an early settlement amount based on the early redemption month selected.