D
darag
Guest
apr has come in for a bit of a bashing from some in the credit union thread. it seems people don't appreciate how fundamental apr is in determining value.
for example, someone suggested you just look at the size of the repayments to appreciate the value on offer. this is like comparing the cost of a bag a spuds without looking at the weight. yes a bag may cost 2.50 in spar versus 4 in dunne's but that tells you nothing about the relative value; the one in dunne's could be twice the size of the one in spar. this is why supermarkets seem to be obliged (i believe) to quote cost per kilo or per liter for many food stuffs.
with loans there are a lot more variables than just weight to consider but basically apr does for loans what cost per kilo does for kerr pinks. the variables to consider with loans include: the amount borrowed, the number of repayments, the size of the repayments and the amount of the final ("balloon") payment if any. there is a well known formula in finance which reduces all of these factors down to a single figure called the "rate" which still depends on the term (length of time) of the loan. the "apr" figure is an annualised version of this rate figure which factors in how long the loan runs for.
obviously given two loans, if the borrowed amount is the same and the repayment schedule is the same then comparing the size of the repayments will tell you which offers the best value. however, just like when you are looking at two different sized packs of sausages wondering which is better value, often you don't have the exact same conditions attached to two different loans which makes it difficult to work out which is the best value. however given the price per kilo, you can immediately figure out which is better value.
in the credit union thread, crugers gave an example where the same apr and the same loan amount and repayment schedule led to different monthly repayments. however i am unable to make sense of any of the figures in that message; i started by just looking at the aib figure of 229.63 per month for 60 months - this gives a total amount of repayments of 13777 which doesn't tally with his later figures. i gave up at this stage. basically i don't buy his claims that apr calculations are not an exact science.
on advantage of apr over cost per kilo for spuds is that you don't even have to worry whether the potatoes are muddy or bruised or half sprouting. one bank's hundred quid is as goods as another's.
for example, someone suggested you just look at the size of the repayments to appreciate the value on offer. this is like comparing the cost of a bag a spuds without looking at the weight. yes a bag may cost 2.50 in spar versus 4 in dunne's but that tells you nothing about the relative value; the one in dunne's could be twice the size of the one in spar. this is why supermarkets seem to be obliged (i believe) to quote cost per kilo or per liter for many food stuffs.
with loans there are a lot more variables than just weight to consider but basically apr does for loans what cost per kilo does for kerr pinks. the variables to consider with loans include: the amount borrowed, the number of repayments, the size of the repayments and the amount of the final ("balloon") payment if any. there is a well known formula in finance which reduces all of these factors down to a single figure called the "rate" which still depends on the term (length of time) of the loan. the "apr" figure is an annualised version of this rate figure which factors in how long the loan runs for.
obviously given two loans, if the borrowed amount is the same and the repayment schedule is the same then comparing the size of the repayments will tell you which offers the best value. however, just like when you are looking at two different sized packs of sausages wondering which is better value, often you don't have the exact same conditions attached to two different loans which makes it difficult to work out which is the best value. however given the price per kilo, you can immediately figure out which is better value.
in the credit union thread, crugers gave an example where the same apr and the same loan amount and repayment schedule led to different monthly repayments. however i am unable to make sense of any of the figures in that message; i started by just looking at the aib figure of 229.63 per month for 60 months - this gives a total amount of repayments of 13777 which doesn't tally with his later figures. i gave up at this stage. basically i don't buy his claims that apr calculations are not an exact science.
on advantage of apr over cost per kilo for spuds is that you don't even have to worry whether the potatoes are muddy or bruised or half sprouting. one bank's hundred quid is as goods as another's.
