2278% apr?????????

IronWolf

Consumerist wrote: »

Let's take another example :-

Halifax charges £5 per day for an unauthorised overdraft.

Let's say you are £1.00 overdrawn for 1 day then that's 500% interest per day. Over a year that's 365 x 500% = 182,500% APR.

See how easy it is to generate very high APRs from small amounts over short periods?

Thats not the same though, thats a fixed charge, whereas when you have a % interest charge, it compounds to produce even crazier numbers.

For example if I loan £100 at £10 a week, and dont bother to pay it for a year, I owe £5,300 after a year, but if its 10% a week, I owe £14,200, almost triple!

Thats the power of compounding, and why the APRs of short term loans like this seem ridiculous.