I'm always paying, never make it, but you can't look back

[venta]

So, sums. I can, broadly speaking, do sums. I have a degree in maths.

However, interest rate calculations have always baffled me. Sure, if you ask me to calculate 3 months compound interest at a monthly rate of x% I know what to do. However, when it comes to real examples of mortgages and credit cards, I can't work out what the sum I need to do is. I'm still slightly baffled about the interest charged me when I was a day late paying my credit card off in full in March.

Today, the BBC carried a story about a loanshark. It includes the following statement about someone who borrowed £1000:

"...to pay £49 a week over 60 weeks, making the total amount he had to
repay £2,940 at 917% APR."

Now, if we approximate 60 weeks to a year, then surely that's an annual interest rate of no more than 294%. The quoted APR isn't even in vaguely the right ballpark.

So... have I completely failed to understand APR ? (Wikipedia's page on the subject didn't really help with the definition.) Or is the BBC publishing unmitigated wank in the name of investigative journalism ?

Edit It turns out I'd failed to understand APR, and the BBC is cleared in this instance.

Comments

[ewx.livejournal.com]

Surely 194% interest [again using the dodgy 60 weeks=1 year approximation], since the £2,940 presumably includes repayment of the initial £1,000. I'm not clear where they get the 917% figure from either.

[wechsler.livejournal.com]

194% would be the correct figure only if the £1000 was paid back in bulk at the end of the year. As the victim holds much of the money for much less time than that the rate must be higher.

Which isn't to say I can actually do the right sum either.

[ewx.livejournal.com]

Yes, that makes sense.

[venta.livejournal.com]

Yes, 194% is what I meant. Can do sums, honest.

[ewx.livejournal.com]

(In fact having worked out the weekly rate the 917% is just that to the power of 52.)