How much was that loan!

With talk about reforming the Consumer Credit Act, I thought I would highlight an issue with the APR, that was pointed out on News 24 last weekend.

Now say I lent you a tenner last week, and like a good friend you gave it back to me today, and brought a pint to repay the favour.

Now if we say that the pint costs £2.60 (and if you don’t believe me, you try drinking in Westminster!). The total cost of the “loan” is £12.60

Now using this calculator off Lambeth’s Trading Standards website, and playing about with the figures to get it to work. If you enter

Amount of Loan (£) 10

APR (%) 1500

Number of weeks/months

(eg 300 for 25 yr mortgage; 36 for 3yrs) 1

It produces the result of

Total Amount Payable (£) 12.60

That’s right whilst the total interest paid is 26%, the APR is 1500%.

So next time you hear or read on in the local media about a 300% APR loan, don’t just assume that it’s an evil loan.

Please note, I can’t confirm these figures, and am only using what information was available to me on the web.

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