Loan Repayments - Just seem wrong

I was lookin at my finance screen the other day when I just happened to notice my loan details.

Basically I am paying back 375k per month for 31 years, on a $41million loan.

I worked it out and that equates to repayments of $139,500,000....Yes thats $139.5million.

Thats a staggering interest charge of nearly $100million, where did my board get this loan!!!

No wonder on my confidence screen they are thinking of sacking the accountants.

Does seem a bit strange, especially given that paying it off in 31 years without the interest would be $1.3m per year, whereas with interest it is $4.5m per year.

Perhaps the bank was Northern Rock and they have found a cunning way to sort out their problems.

Its even more staggering when you look at my bank balance and see its at $180million or around that figure. Why don't we just pay it off early, I am in 2021 so that would save us around $54.4million in interest!

I have a fairly hefty loan now at Werder Bremen too that is almost certain to spiral us into debt very soon. The board built a new stadium ( ) and took out a £140 million loan which we are paying back at a rate of £1.1 million per month. I can't remember the loan duration, but it is something like 25 years I think so our interest is fairly steep and we were already losing ~£2 million per month before that

i just worked out mine as well

i have 2 loans as arsenal manager

loan 1= 119million 1.2m p/m until 2020 = 186m leaving 67m intrest

loan 2= 83million 575k p/m until 2035= 192m leaving 109m intrest

so instead of paying back 202 million like it says im paying back 378 million

thats a lot of intrest

wouldnt mind owning the bank that im paying back though

The reason its so large is because the interest is year on year, not over the loan.

For example, you take out a £41,000,000 loan at 10%. This doesn't mean you pay £4,100,000 on top of the £41,000,000. It means you pay 10% interest of the outstanding balance each year.

So assume your repayments are £375,000 pm.

In year 1, you would pay a mass of £4,500,000 off the loan, which is £41,000,000 + £4,100,000 interest.

The second year balance would be £45,100,000 - £4,500,000 = £40,700,000. (Yes, only £300,000,000 off the actual loan.

Now, looking at those figures, the loan is probably taken at around 7% (standard rate for loans that large IRL). - hence the amount of time, and money it is to play off the loan.

In retrospect, I'll offer you the sums of my mortgage.

I bought my house valued £184,000 - but took a mortgage at £160,000 @ 0.5% over the base rate of the Bank of England (which is in decline due to the credit crunch \o/). By the time I pay off my mortgage in 30 years, Its estimated I would have payed the bank nearly £475,000 in those 30 years. (assuming the base rate doesn't fluctuate more than 1-2%)

When I first saw that, i thought there must be something wrong, but its just the way it is.

Aside from that, the board will generally pay off a loan early if the club is in a healthy financial situation. Although you feel $180,000,000 is enough to pay off the loan and carry on as normal, the boards financial structure may not reflect this, as paying the loan early (along with early pay fee's - usually at 10% of the loan value) may leave the club in a financially weaker situation.

I've looked into this in great detail a few years ago about the loans on FM. But they seem to have the structuring pretty much perfect.

I was actually thinkin about it when I was in the shower last night and then realised the interest wasn't that bad over 31 years on $41million. It just seemed it at the time.