#FinCapWeek – Buying an item using credit
In its final article for Financial Capability week Apex will concentrate on buying commodities using credit by showing the impact of APR, what it means and how much it differs between companies.
For example if a tenant is looking to purchase a TV on credit there are two essential things that need to be taken into consideration – APR and the length of the loan.
So what is APR?
APR stands for Annual Percentage Rate and this is how much you are charged to borrow money. It is worked out as a percentage of the total amount if paid back within a year.
Using APR to help you compare the cost of your credit is relatively easy – a loan with a low APR will be cheaper than one with a high APR.
Length of Loan.
The amount paid back on credit will also depend on the number of payments made and over how long. So for example a loan at a lower APR but over 3 years may actually be more expensive than a loan for the same amount at a higher APR but paid back within a year.The longer period of repayment, the more expensive it is to borrow
When looking to avail of credit It is important to shop around. If unsure always ask the company how much you will pay back in total over the period of the loan and then compare with other offers.
Below is a table showing you various different options and how they are affected by the APR figure and the period of the loan. This table is based on purchasing a TV with an original purchase price of £599.99.