A company is offering me £88 if I repay £100 within 2 weeks, or £83 if I repay £100 within 4 weeks. I don't know how to work out APR - does anyone know?
2006-08-07 03:39:07 · 6 answers · asked by tartansinatra2 1 in Business & Finance ➔ Credit
Thanks everyone, but none of these 4 answers agrees with any of my previous sources (who mostly agree that £17 per £100 borrowed is an APR of 443.22%). This sounds like a loan shark, but in fact this is a perfectly legitimate service called a Pay Day Advance offered by a UK Cheque Casher. I write a £100 post dated cheque for 2 or 4 weeks and they give me either £88 or £83 respectively. (They charge 10% or 15% + £2 admin fee)
to me, these fees are still way cheaper than my "respectable" bank charging £30 for going into overdraft or £35 a returned DD!!
Trouble is there are so many answers around, I'm trying to clear this APR issue up.
2006-08-07 23:07:13 · update #1
If you were to repay within 2 weeks, you will pay £12 interest on the loan of £88.
Which is 14% in 2 weeks, which works out at a bank breaking 354% Apr!
If you go the other way you will repay £17 interest in 4 weeks, on the loan of £88
Which is 19% in 4 weeks, and is still a bank breaking 251% APR!
Either way, try and find someone else to lend you the money this is a rip off. Though I suspect it might just be your maths homework!
2006-08-07 03:46:21 · answer #1 · answered by nkellingley@btinternet.com 5 · 0⤊ 0⤋
Normally I'd charge you about £50 for my services but since you won't pay it'd be a shame not to help you out.
88*(1+i/52)^2 = 100
i/52 = (100/88)^0.5-1
=6.6% This is the wpr (weekly percentage rate)
To annualise this in order to get the apr we do:
APR = (1 + i/52)^52 - 1
= 2676%
Similarly the other option will give you an apr figure of 1027%
Either way neither represents good value.
The calculations were based on the assumption that you make one repayment at the end of the lending term.
It's nice to see my calculations agree with those of Graham above.
2006-08-07 07:27:26 · answer #2 · answered by Young Man 3 · 0⤊ 0⤋
According to my calculations the APR on the 2-week loan is over 2500% (Meaning that if you left it for a year you'd owe them 25 times what you'd borrowed). The APR on the 4-week loan is a lot better - only 1000% or so. However, I'm not used to these calculations so it's possible I've made a mistake.
Either way, it's a rip-off, and you're taking a big risk - the kind of people who offer these rates are not the kind of people you want to be owing money to.
2006-08-07 04:00:57 · answer #3 · answered by Graham I 6 · 0⤊ 0⤋
they'd use a distinctive calculation technique....and that they are in a position to... economic institutions over here interior the states use best value... and LIBOR. as long as they show what technique they use, they are in a position to apply any formulation they choose. we've "reality in lending" regulations over here, and interior the locate print they'd desire to show precisely how they do their calculations. Its no longer "bamboozling". you're in simple terms doing what others must be doing with all economic concerns... paying interest........
2016-09-29 00:10:24 · answer #4 · answered by mauzon 4 · 0⤊ 0⤋
I won't even bother trying to work this out. This is a rip-off on a huge scale. Report them to your local trading standards officer or the Office of Fair Trading.
2006-08-07 03:45:46 · answer #5 · answered by Anonymous · 0⤊ 0⤋
your lender should work all that for you.
2006-08-10 07:28:37 · answer #6 · answered by Anonymous · 0⤊ 0⤋