personal finance assembly

8/3/2019 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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