Personal Finance Assembly
Transcript of Personal Finance Assembly
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The Essentials
The APR
Jimmy Choos
The dreaded CC
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All of you will soon be leaving,either for work or university.
A recent government study
shows that 80% of adults haveno idea what is meant by APR.
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Amongst other things, we could look at:
Mortgages BudgetingRenting InsuranceCredit Pensions
But, as time is limited lets start withthree little letters
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The Annual Percentage Rate
In other words, how much it isgoing to cost you to borrow.
This should be listed inALL creditagreements
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An example:
If you borrow 100 for one year
at a rate of 6.9% it will cost you6.90 in interest.
The A.P.R. Also includes anyother charges which you mayhave to pay to a lender.
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So it is simple, right?
WRONG!!!
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This is Emma.Emma, is a girl and she lurrrves shoes.
At the time of her Uni Ball, Emma couldnt resist a
50 pair of Jimmy Choos she found in the sales.
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She used her MBNA credit card which had anattractive monthly interest rate of just 0.5614%
the equivalent of 6.9% APR.
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Emma spent too much inJanuary 2009 so her cheque for5 (the minimum payment) was
late and was returned.
She had to pay a late fee of 25to MBNA AND, 25 to her bank
for the bounced cheque.
Emmas bargain Jimmy Chooshave now cost her
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100
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Emma doesnt use hercredit card again all year.
She makes minimumpayments of 5 per month
until December 2009.
Unfortunately, however
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Throughout2010, Emma
continuesmaking herminimum
payments of 5
per month.
Having learned her lesson she misses no further
payments and she makes her final payment of
3.81 in April 2011!
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This is 27 months after the Uni Ball and
8 months after the shoes have worn
out.
In total, including interest and bank
charges, Emmas (bargain??) 50shoes, have cost her
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208.81
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This is, of course, the dreaded:
Credit CardIt also includes STORE CARDSIKEAs store card has an APR of 29.9%
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Offered to those who are 18 or older
Credit Card companies exist to make money
APRs can range from:0% (on balance transfers) to 24%+
Knowing that they will be short of cash,students, in particular, are targeted by slightlyunscrupulous banks
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If you wish to find outmore, there is aninteractive on-line creditcard statement.
You can use your mouseto highlight anyterminology about whichyou are uncertain.
www.fsa.gov.uk/consumer/bytes/mod03/ct_top02_01.html
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The Consumer Credit Counciland the Citizens Advice Bureau
inform clients that if they had:2,000 on a 14.9% credit card
and paid the minimum 2% or,5 per month
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They would pay:
3061in interest.
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And, it would take nearly
30 yearsto pay it off.
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2006 AUDI A3
1.6, 3dr
6995
Nicos
DreamCar?
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This web site is one of
many which allows youto compare lenders.
Beware, many such
loan calculators aresponsored by particular
banks.
http://www.quickcompare.co.uk/find-loans.asp?est=loan+calculator
http://www.quickcompare.co.uk/find-loans.asp?est=loan+calculatorhttp://www.quickcompare.co.uk/find-loans.asp?est=loan+calculatorhttp://www.quickcompare.co.uk/find-loans.asp?est=loan+calculatorhttp://www.quickcompare.co.uk/find-loans.asp?est=loan+calculatorhttp://www.quickcompare.co.uk/find-loans.asp?est=loan+calculatorhttp://www.quickcompare.co.uk/find-loans.asp?est=loan+calculator -
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Sometimes, a more
useful website will allow
you to calculate how
much interest you will
pay.
This will depend upon
how much you borrow
and over what period.
http://money.msn.co.uk/Bank_Plan/loans/Tools/LoanRepaymentCalc/default.asp
http://money.msn.co.uk/Bank_Plan/loans/Tools/LoanRepaymentCalc/default.asphttp://money.msn.co.uk/Bank_Plan/loans/Tools/LoanRepaymentCalc/default.asphttp://money.msn.co.uk/Bank_Plan/loans/Tools/LoanRepaymentCalc/default.asphttp://money.msn.co.uk/Bank_Plan/loans/Tools/LoanRepaymentCalc/default.asp -
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So how about the 7,000 Nico needs
to buy his dream Audi A3?
Being a little nave, Nico, briefly
looks on-line and sees a great deal:
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Unfortunately, Nico misses the small printat the bottom of the page. (Thats right,the very small print!
Desperate for his Audi, Nico does a deal.
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With Car Credit UK
Nico will have to
pay
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A.P.R.35.4%
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Monthly Payments
253
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Total Repayment
12,140
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Interest Charge
5,140
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With a little more care and
patience, Nico may havebeen able to find himself a
better deal
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LenderAPR%
Monthly
Payment
TotalRepaid
InterestCharge
LloydsTSB
5.7 163 7822 822
Bank of
Ireland 10.9 179 8585 1585Yes CarCredit
19.9 206 9880 2880
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Had Nico taken a loan out withLloyds TSB as opposed to Car
Credit UK he would have savedhimself a massive:
4318
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Remember, be savvy
Shop around for the best loans
Make use of the Internet
Read the
small print, especially
what happens when you are late with ormiss a payment!
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