437 Percent
WTF?
Have a look at the image on the left. This is a crop of a page from Facebook.
Look at the last line. APR 437.4%.
This means (unless I’m way out) that every £1 I borrow means I will have to pay back £437 (ignoring the .4%) if I keep the loan for a year. Let’s work that (bearing in mind I’m not great with this!) to borrow £10,000 of one year. I would need to pay back £4,370,000
Are people really that desperate? Would they really take a loan like this?
Or is this just a piss take?
Wolfie on October 18th, 2008
Sorry, you are a bit out on this one. 437% of £1 is not £437, it’s £4.37.
£1 = 100 pence
100 pence = 100%
1 pence = 1%
437% = 1 pence x 437 = 437 pence
437 pence = £4.37
Still a very high APR, but on these payday loans I have seen rates of over 1,000%.
But APR takes into account costs of the finanace, not just simply the interest charged on the principal, so it’s not always as easy as doing a straight percentage calculation. For example, the site you mention offers £1,500 over 78 weeks, and says the total payable is £4,180.80. The APR is quoted as 437.4%, but a straight calculation on £1,500 would actually give you over £6,500 to repay.
I’ve never really looked at APR calculation before, but what it looks like is that it is a black art understood by very few people. I, for one, am baffled.
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