Business Magazine

Understanding APR

Posted on the 18 February 2011 by Buyasyouview @BuyAsYouView

The term “APR” stands for the Annual Percentage Rate of charge and was introduced to help consumers compare the cost of credit offers. When an APR is calculated, it takes into account the interest rate; how the loan is repaid (Direct Debit, coin meter TV etc.); the length of the loan agreement (or term); frequency and timing of repayments; the amount of each payment; and any fees associated with the loan.  Still confused? It’s easy to see why most of us have difficulty in understanding and comparing APRs when there are so many different factors involved!

When comparing similar types of credit over similar periods of time, it is a formula that works really well. However, when comparing different types of credit over different time periods it can be misleading, especially concerning short term loans where the APR represents the cost of borrowing for the whole year.  For many short term loans, the APR would seem excessive on first glance (sometimes in the region of 1500%); however if these loans are repaid in a short period of time as intended, the fees are reasonable. Problems arise when borrowers take short term loans on these terms and fail to repay in the agreed timeframe. Once this happens, the interest can snowball and leave the borrower in serious financial difficulty.

The key with any type of loan is to ensure that you get the right type of loan over the right time period. Be sure when signing an agreement that you will be able to meet the terms of the loan and make all of the repayments as agreed.

The APR that we offer to Buy As You View customers includes all relevant charges/costs in the calculation as specified in the Consumer Credit Act 1974. These costs include the provision of a coin meter and an account manager visiting to make collections on a regular basis.  Additionally, we don’t charge late fees or penalties as is the case with many mainstream credit providers. At Buy As You View, our main focus is on responsible lending – i.e. offering great quality products to our customers with low weekly payments. Additionally, we will always consider cases where bad credit may have been a problem in the past. For more information on how we operate, please follow this link.

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