The cost of borrowing

[Pages:21]The cost of borrowing

Unit 4

This is Rob

> He has a part-time job. > He receives benefits but some of

them are not being paid yet. > He is a single parent of three

under 16. > Bills keep coming and he

struggles to pay them...

Rob needs cash

> To pay for school trips. > The children need new shoes. > The boys want a video game. > Rob needs new clothes.

Rob needs cash

Rob decides to borrow ?300... Where from? > Doorstep lender > Credit union > Credit card > Bank loan > Payday loans > Catalogue Which of these will be the best for Rob?

Doorstep lender What are they?

A doorstep lender is a company which lends you money and calls at your home to collect the repayments.

Doorstep lender How do they work?

In July 2017 one doorstep lender offered a ?300 loan over 52 weeks: > 52 payments of ?10.80 per week, > 299.3% APR. > Total amount payable ?561.60.

What is APR?

Abbreviation for Annual Percentage Rate.

"The rate at which someone who borrows money is charged, calculated over a period of twelve months."

The rate includes interest and other charges such as acceptance or document fees.

Doorstep lender What really happens?

?300

July 2017

52 payments of ?10.80 per week = ?561.60

?0

Aug 2018

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