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# Interest rate on Postgraduate Student Loan

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1. I'm interested in applying for the Postgraduate Student Loan of £10000 but I have queries about the interest rate on the loan. Currently the interest rate is 4.6%, so I was wondering how much interest rate I would have to pay per month or per year in addition to repaying the loan.

Assuming I want to repay the loan on a standard manner in 30 years. Therefore, £10000 divided by 30 years is £333 per year (10000/30=333) and £27.75 per month. Is the 4.6% interest rate the amount corresponding to the £10000? If yes, 4.6% interest on £10000 is £460. Are these £460 the total amount of interest I must pay? Or must I pay £460 each year in addition to repaying my loan? Distinguishing between whether I must pay £460 interest in 30 years or whether I must pay £460 interest every year is crucial to my decision on taking this loan, because £460 interest in a total of 30 years is only £15.31 a year and £1.27 a month, whilst £460 every year for 30 years is £38.33 a month, which would skyrocket the monthly amount I would have to pay to £66.08 a month, £792 per year, and £23788 in 30 years! The lender's gain would then be £13788! So which one of the two is it?

Finally, the loan gathers interest rate after the first installment of payment made to me. Does that mean that my loan will accumulate interest on it even before I have started to gain an income over £21000?
2. (Original post by eleana15)
I'm interested in applying for the Postgraduate Student Loan of £10000 but I have queries about the interest rate on the loan. Currently the interest rate is 4.6%, so I was wondering how much interest rate I would have to pay per month or per year in addition to repaying the loan.

Assuming I want to repay the loan on a standard manner in 30 years. Therefore, £10000 divided by 30 years is £333 per year (10000/30=333) and £27.75 per month. Is the 4.6% interest rate the amount corresponding to the £10000? If yes, 4.6% interest on £10000 is £460. Are these £460 the total amount of interest I must pay? Or must I pay £460 each year in addition to repaying my loan? Distinguishing between whether I must pay £460 interest in 30 years or whether I must pay £460 interest every year is crucial to my decision on taking this loan, because £460 interest in a total of 30 years is only £15.31 a year and £1.27 a month, whilst £460 every year for 30 years is £38.33 a month, which would skyrocket the monthly amount I would have to pay to £66.08 a month, £792 per year, and £23788 in 30 years! The lender's gain would then be £13788! So which one of the two is it?

Finally, the loan gathers interest rate after the first installment of payment made to me. Does that mean that my loan will accumulate interest on it even before I have started to gain an income over £21000?
The annual interest is charged annually - so the total debt will increase by 4.6% (or whatever the rate is based on inflation) each year. However it wouldn't be 4.6% on the entire amount of the loan unless you hadn't repaid any of the loan at all. As you pay off the loan the interest is applied to a smaller and smaller outstanding debt.

HOWEVER

Your repayments on the PGL are not set at an amount to repay in full within 30 years - they're linked to your income - so whether the interest rate is 4.6%pa or 50%pa the repayments each month would be the same - the only difference will be in how quickly you'll repay (or how much would be written off after 30 years).

Your repayments will be 6% of your annual income above £21k pa. http://www.thestudentroom.co.uk/cont...h-you-ll-repay so if you earn £25k pa you repay £20 per month, if you earn £45k pa then you repay £120 per month. It's pretty much set up that only people earning on average £45k for 30 years following their loan will repay their loan in full - anyone earning less than that will not repay in full and have the remaining loan wiped after 30 years.

FTR "Interest will be charged at the Retail Price Index (RPI) plus 3%; the current interest rate is 3.9%." - so interest in the first year will be 6.9%

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