APR – What do we need to know about it?

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Presentation transcript:

APR – What do we need to know about it?

People rarely give you something for nothing. APR People rarely give you something for nothing. If you borrow money you will have to pay back more than you borrow. How much more you pay back is determined by the APR on the loan. What does APR mean? APR stands for Annual Percentage Rate. 5% APR means that each year the amount you owe will increase by 5%. The longer it takes you to pay back what you borrowed, the more money you will end up paying back. “Never a borrower or a lender be.” Why do you think Polonius gave his son this advice in the play Hamlet?

Typical rates of APR Car loan Credit card Payday loan If you borrowed £1000 for each loan and didn’t pay any back, how much would you owe at the end of a year? 8% of 1000 1000 ÷ 100 x 8 = 80 1000 + 80 = £1080 16% of 1000 1000 ÷ 100 x 16 = 160 1000 + 160 = £1160 3100% of 1000 1000 ÷ 100 x 3100 = 31000 1000 + 31000= £32000