Your Questions Answered

General Information

Flat Rate Vs APR - What's the difference?

Members need to be on their guard when dealing with car dealers. Legally, dealers are obliged to confirm the APR (annual percentage rate) before you sign an agreement where finance is being provided to fund a vehicle purchase.

A member recently contacted bira bank to enquire about vehicle finance rates. He was surprised when we quoted both an APR figure and a flat rate figure, particularly as his recent visit to a car dealer had only elicited a very attractive flat rate with no mention of APR at all. In practice, you may be lucky to be quoted any rate at all by some dealers during preliminary discussions while others may quote you the flat rate as opposed to the APR as it always appears the most attractive being the lesser of the two. Unfortunately, this can be misleading as you may think that you are getting a good deal when in practice you are not.

So what is the difference between the flat lending rate and the APR? The flat rate is the basis of the calculation for the amount of interest you will pay over the term of the loan. However, as the loan is diminishing as it gets paid back over the loan term(say 3 years),then the “real” rate of interest is higher as it is calculated based on interest payable v the average size of the loan outstanding throughout the term(plus certain fees associated with the loan).

Typical example: On a loan of £10,000 over 3 years for a new vehicle,our flat rate of 3.30% equates to an APR of 6.40% (note: the APR is always just over the flat rate *2).For a dealer to quote 3.30% then he should clarify that 3.30% represents the flat rate not the APR.

Always get the dealer to quote the lending rate and to clarify whether it is the flat rate or the APR and compare like with like. Knowing the difference can really save you a lot of money.

How are repayments made

All repayments must be made by standing order from your bank or building society and should not be less than £20 per month.

What about loan insurance?

Payment Protection Insurance is to be arranged at your own discretion. We do not offer this service.

What about VAT?

For all items regardless of whether VAT is recoverable, it is a legal 
requirement that the supplier’s invoice must be made out to ‘Bira Bank’. If VAT is recoverable (on most items except cars) then this can be done on the authority of the finance document which will be your input advice. All the VAT on a hire purchase agreement is recoverable on your next VAT return regardless of the fact that you may not have completed the 
purchase until, say 36 months time. VAT on leases is charged and
recoverable on each monthly instalment, for which we will provide a VAT invoice.

Can I settle early?

You may settle your outstanding balance at any stage of the agreement without penalty, and an appropriate early rebate will be given. If you have financed a vehicle under our affinity partnership schemes, different rules apply. You can settle your outstanding balance without penalty after 12 months.

About the Change

Why is this happening?

Over the past few years, banks in the UK have faced an increasingly regulated environment by the Bank of England. Bira Bank needs significant investment to improve its technology, computer systems and offer more banking services to better service member requirements. Bira Group does not have the resources to invest in the Bank and believes that it is in the best interest of the Bank and its customers to sell the Bank to Birmingham Bank.

Will it be the same people?

Yes, you will still be dealing with same people you usually do as they are moving to the new Bank.

The change of ownership and name will also not affect the Bank’s core management team with David, Frank, and the rest of the existing team striving to provide the personal service that made the Bank so effective and unique

What about our Deposit(s)?

We wish to reassure you that the new bank will be covered by the Financial Services Compensation Scheme. Payments under the scheme are limited to a maximum payment to any one depositor if £85000. For more information, please contact one of our team.

Will rates for loans and savings change?

Birmingham Bank is keen to make sure that Bira members receive the same benefits. However, the interest rates for loan and deposits are determined by market forces in the banking sector, and they will always be under review (as they are now). New products will be made available over time which will have different rates, but we will make sure that we remain competitive.

The rates will not change on any existing loans or fixed rate deposits that you hold with us.

Will contact details change?

During the first few months our address will remain at 225 Bristol Road. However, it is planned to move to new offices in Birmingham.

The telephone number will also remain the same for the foreseeable future, and the Bank will still be ‘option 3’ if you call the main Bira number.

While the usual details remain in place they will eventually be closed off and the new contact details can be found here (link to website contact page).

Will the new Bank be offering Current accounts and overdrafts?

It will be very much a case of business as usual for the first few months. Any decision to offer current accounts for businesses will be made at some point in the future

For more information about any of the above or if you have any further questions please contact us in the usual way.