Timeline for 20% APR means only 10% interest? (UK)
Current License: CC BY-SA 4.0
7 events
| when toggle format | what | by | license | comment | |
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| Jan 26, 2019 at 14:31 | comment | added | David Richerby | Your calculation here is incorrect. If you pay 1.67% interest every month, the annual rate is 1.0167^12=1.2199, i.e., 21.99% APR rather than the 20% required. The monthly interest rate is the twelfth root of the annual rate, not one twelfth of it. As @fgb says, that would be a monthly rate of 1.53%. | |
| Jan 25, 2019 at 18:32 | comment | added | Peter Green | @Accumulation Don't assume that terminology is used in precisely the same way in different countries. In the EU we use "effective APR" (roughly what you are calling APY) in loan advertising. This is why you will hear/see APRs of 1000%+ in the small print/fast talking of payday loan adverts over here. | |
| Jan 25, 2019 at 18:10 | comment | added | Acccumulation | @fgb I'm pretty sure that you are either making an incorrect statement, or wording your claim poorly. The APR is the rate before compounding, so calculations using it include compounding, but the rate itself does not. APY is the rate after compounding has been taken into account, so you don't need to include compounding to find the interest due after a year. | |
| Jan 25, 2019 at 17:49 | comment | added | Acccumulation | The APY represents how much you would pay if you were to take out a loan, accrue interest for one year, and then pay off the interest at the end of the year. APR represents the amount you would pay if you continuously pay interest (and thus have no compounding). | |
| Jan 25, 2019 at 17:32 | comment | added | fgb | In the UK, the APR includes compound interest. To pay of the loan with a monthly payment of £9185.68, you'd need a monthly interest of 1.53%. | |
| Jan 25, 2019 at 12:45 | vote | accept | kamilk | ||
| Jan 25, 2019 at 12:18 | history | answered | Ben Miller | CC BY-SA 4.0 |