A retained interest loan is a facility where the interest charges for the full term (sometimes part of the term) of the loan is deducted from the facility. Most bridging loans are calculated using retained interest.
The vast majority of the bridging loans that we arrange are based in Roll Up Interest.
The best way to explain this is with a simple example:
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.
Enter the amount of money that you would like to borrow in the loan amount box.
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.
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.
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.
Last updated: 14 August 2018 | © KIS Finance 2020