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ventaSo, 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.
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.
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no subject
Date: 2008-07-29 12:10 pm (UTC)Essentially the technique above was meant to simulate putting your repayments in separate savings so your loan is gaining interest on the full amount until you repay it in lump once your payment plan has matched that value.
That was a fairly useful starting point, and the numbers all seem sensible now. I can understand getting confused with endpoints, and I was always crap at summing series.
You can be Designated Hero of this Week, and you may now stop wasting your time explaining things to the stupid :)
no subject
Date: 2008-07-29 12:12 pm (UTC)To be fair you seemed to understand it perfectly the first time I explained it without any mistakes in my explanation. ;-)