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.