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Before you begin any PPI claim, it’s advisable to have an idea of what your PPI refund should be. Calculating the figure that you should be owed can be a valuable tool.

The reason you should have this information to hand is because it is key to knowing whether your bank has offered you an incorrect figure or tried to scam you further by undervaluing your refund.

Without a fair idea of the refund you are owed, it’s difficult to know if your bank has calculated in all of the relevant factors. Once you are aware of the figure, it then makes it much easier to know if the bank has dealt with your claim fairly.

Re-Opened Cases

It would be unfair to suggest that all PPI refunds aren’t accurate and in line with the rules set out by financial authorities. In 2015, it was reported that 2.5 million PPI claims cases were having to be reopened because banks and lenders had short changed the claimants, however.

Such a large figure suggests that a good portion of these 2.5 million people took the banks figures at face value and had no prior knowledge of how much they should have received.

What Do You Need to Know?

• The full amount you borrowed when took out the credit agreement
• The specific terms of the loan i.e. single or monthly premium
• The interest rate or APR on the loan

Taking the example of a £20,000 loan, which was taken out over a 5-year period, with an APR of 7.9%.

The PPI amount can vary on certain loans and credit agreements, but it’s most commonly 25% of the loan amount, which in this case would be £5,000. That makes the total loan amount £25,000.

Calculating Interest on PPI

Taking the £5,000, we then need to multiply that by the 7.9% APR amount.

£5,000 x 7.9% = £395

This is just the total interest for one year, so in order to figure out the sum over the course of a five-year agreement, then we’d need to multiply that figure by five:

£395 x 5 = £1,975.

Calculating PPI Compensation

The legislation states that if you were mis-sold PPI, you’re entitled to compensation. PPI compensation has been set at 8%, which is a single amount as opposed to being compounded year-on-year.

£1,975 x 8% = £790

Calculating the Final Figure

Now you have these three figures, it’s time to work out your final figure – the PPI amount, the interest and the 8% compensation combined – the last step is to add them all together, which will give you a good idea of what you should be entitled to.

£5,000 + £1,975 + £790 = £7,765.

If you think you have been mis-sold PPI it’s important to have an idea of how much you could be owed, to ensure that you are one step ahead of the banks, meaning that you could challenge any incorrect refund offer.