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Mathematical Genius Required


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On the basis that you only pay the £40 and no more interest is added on, then the APR is 20%.

 

That cannot be accurate; he's paying an extra 20% in two weeks, let alone the amount it would be in a year.

 

 

 

This gadget claims to calculate APR from the numbers you input. I gave it a loan of £200, a fee of £40, an interest rate of zero and a total of 2 repayments, made weekly.

 

If I set the "compound frequency" to daily, the APR comes out at 644.198%. If I set it to annual, the APR comes out at 59,235.3%.

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That cannot be accurate; he's paying an extra 20% in two weeks, let alone the amount it would be in a year.

I worked it out in a Provident style loan. The interest is added on at the front and no more is added aslong as payments are made.

 

I got a piece of paper out but the maths confused me to do it any other way. :)

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I worked it out in a Provident style loan. The interest is added on at the front and no more is added aslong as payments are made.

 

A loan can be made in that fashion, but - as I understand it - in order to calculate a comparable APR, you have to convert that up-front interest payment and figure out the equivalent interest rate if it was payable over the duration of the loan. Or something. I just know it's too complicated for me to work it out!

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It's essentially a 2 week 100% mortgage with an interest rate of 20%.

 

Or £40 a fortnight on a £200 loan

£80 a month on a £200 loan?

 

Using an APR calculator on the internet assuming £80 a month on a £200 loan and one monthly repayment of £280, then 5569.4% APR

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