How to calculate a fixed rate of interest on a Balloon Payment loan

Denis said:
Ya...much adoo about nothing!
A "balloon payment" is same as borrower deciding to pay off loan in full...
And that "4.07" is more mysterious than the holy spirit taking a hold
of you if you've recited the proper prayer with proper pronunciation...
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I've begun to believe, being moved upon by the spirit of something, that "4.07" is a flat charge of some sort, rather than an interest rate of any kind.
 
nicoprz said:
This is the example I have been provided with:

Loan Value: £12000
APR: 7.9%
24 Monthly Payments Of: £194.58
1 Final Payment: £9000
Duration of agreement: 24months + 1
Interest Rate: 4.07%
Total Amount Payable: £16,669.92
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The OP was "provided" with above.
By who?
To nicoprz: can you not ASK whoever provided you with that??
 
I have only loosely followed this. It looks like some sort of hocus pocus.

I can make sense of this as a loan with an annual rate of 7.9% compounded monthly and equal payments of 194.58 at the end of each of the first 23 months plus a balloon payment of 9000 at the end of the 24th month. The present value of those payments is virtually 12,000 (11995.24 to be exact) at 7.9% compounded monthly.

The 4.07% makes no financial sense at all. Either the OP misunderstood something, or someone was deliberately trying to mislead the OP into thinking that the interest rate was much lower than it actually was.
 
JeffM said:
I can make sense of this as a loan with an annual rate of 7.9% compounded monthly and equal payments of 194.58 at the end of each of the first 23 months plus a balloon payment of 9000 at the end of the 24th month.
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Ah! Didn't think of that even though that is how it reads. I had one additional regular payment.
 
tkhunny said:
Ah! Didn't think of that even though that is how it reads. I had one additional regular payment.
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Actually tk the original statement does not say what I said. I just tried to reverse engineer the thing to see how I could get fixed payments followed by a balloon at the end to give the given APR on an initial loan balance of 12,000. That results in a sensible scenario, but it does not accord with the original post.
 
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