MoneySavingExpert Chair, Martin Lewis · Editor, Marcus Herbert

# MSE Forum

edited 6 July 2021 at 4:15PM
50 replies 13.3K views

## Replies

• Forumite
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If the OU didn't object, MSE could simply take a copy of the badge, and apply it to specific participants as appropriate;  it shouldn't take up much of anybody's time to set up, I wouldn't have thought.  And just think of the motivational value!  I might even grab a copy of it myself (assuming that I qualify all the way through)  and use it instead of my present much-loved avatar.
• edited 28 May 2020 at 8:41AM
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edited 28 May 2020 at 8:41AM
I will be signing up.

i am totally biased but OU courses are world class.  I worked in the Maths & Computing Faculty for years (non academic’ . So joined with Martin how could you lose?
• Forumite
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Newbie

Hi,

I wondered if anyone can help with this question please?  I can't understand how the figures for loans 3-5 were reached and therefore why 5 is the cheapest?

You are buying a vacuum cleaner costing £100. But you need to borrow the money to buy it. You are offered a series of choices to borrow the money. Which loan would you choose?

• Loan 1: pay back £120 at the end of the year.
• Loan 2: pay back £115 at the end of the year.
• Loan 3: pay a £10 arrangement fee and then equal monthly repayments; the interest rate is 5% per annum.
• Loan 4: pay a £5 arrangement fee and then equal monthly repayments; the interest rate is 8% per annum.
• Loan 5: pay equal monthly instalments at an interest rate of 7% per annum, plus a final charge of £3.

Which loan did you choose? You may be surprised to discover the cheapest loans are Loans 4 and 5. The issue is that people do not like complexity and so often opt for higher-priced products where the pricing is simpler. For comparison, here are the total costs of each loan option:

• Loan 1 costs £120
• Loan 2 costs £115
• Loan 3 costs £112.70
• Loan 4 costs £109.40
• Loan 5 costs £106.80

Thank you

• edited 29 May 2020 at 6:28PM
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edited 29 May 2020 at 6:28PM
From the answers given, tne interest rates are not APRs (although, when I calculated the answers on the assumption that they were APRs, the options ended up in the same order).  I think these answers are calculated on the basis of the amount outstanding reducing each month, so the interest chargeable also reduces each month.  If I had to, I would put the figures into a spreadsheet to check this, but it's not the sort of thing that I can do as mental arithmetic.
The answers I arrived at by assuming APRs (which, as Martin often tells us, is the crucial way to assess the interest on a loan over time!) were as follows:
Loan 1: £120
Loan 2: £115
Loan 3: £115
Loan 4: £113
Loan 5: £110
Hope this helps!
• 0 Posts
Newbie
MollyR said:
From the answers given, tne interest rates are not APRs (although, when I calculated the answers on the assumption that they were APRs, the options ended up in the same order).  I think these answers are calculated on the basis of the amount outstanding reducing each month, so the interest chargeable also reduces each month.  If I had to, I would put the figures into a spreadsheet to check this, but it's not the sort of thing that I can do as mental arithmetic.
The answers I arrived at by assuming APRs (which, as Martin often tells us, is the crucial way to assess the interest on a loan over time!) were as follows:
Loan 1: £120
Loan 2: £115
Loan 3: £115
Loan 4: £113
Loan 5: £110
Hope this helps!
That’s what I got when I did it!
• Forumite
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MollyR said:
From the answers given, tne interest rates are not APRs (although, when I calculated the answers on the assumption that they were APRs, the options ended up in the same order).  I think these answers are calculated on the basis of the amount outstanding reducing each month, so the interest chargeable also reduces each month.  If I had to, I would put the figures into a spreadsheet to check this, but it's not the sort of thing that I can do as mental arithmetic.
The answers I arrived at by assuming APRs (which, as Martin often tells us, is the crucial way to assess the interest on a loan over time!) were as follows:
Loan 1: £120
Loan 2: £115
Loan 3: £115
Loan 4: £113
Loan 5: £110
Hope this helps!
Thank you.  I put the figures into an amortization calculator to check that and got to the figures in the answer which have been rounded up/down
• Forumite
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Just about to sign up to this. Financial wellness should be taught to as many people as possible.
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Massive thank you Martin for your Academoney Open University Open Learning course. I've just completed the course and achieved my certificate and badge. Very informative and easy learning. Timing perfect during lockdown as I was running out of things to keep my mind interested. Some of the in-course questions are tricky but they make you think! Keep up the good work. Jeff Wilson
• edited 3 June 2020 at 1:12PM
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edited 3 June 2020 at 1:12PM
Hey, well done!
I have to confess that I haven't got very far yet, as I haven't really had the time to commit to it;  but I shall make a greater effort.
(I know, I'll put off cleaning the kitchen - how would that be?)

• Forumite
202 Posts

Hi,

I wondered if anyone can help with this question please?  I can't understand how the figures for loans 3-5 were reached and therefore why 5 is the cheapest?

You are buying a vacuum cleaner costing £100. But you need to borrow the money to buy it. You are offered a series of choices to borrow the money. Which loan would you choose?

• Loan 1: pay back £120 at the end of the year.
• Loan 2: pay back £115 at the end of the year.
• Loan 3: pay a £10 arrangement fee and then equal monthly repayments; the interest rate is 5% per annum.
• Loan 4: pay a £5 arrangement fee and then equal monthly repayments; the interest rate is 8% per annum.
• Loan 5: pay equal monthly instalments at an interest rate of 7% per annum, plus a final charge of £3.

Which loan did you choose? You may be surprised to discover the cheapest loans are Loans 4 and 5. The issue is that people do not like complexity and so often opt for higher-priced products where the pricing is simpler. For comparison, here are the total costs of each loan option:

• Loan 1 costs £120
• Loan 2 costs £115
• Loan 3 costs £112.70
• Loan 4 costs £109.40
• Loan 5 costs £106.80

Thank you

Regretting reading this, makes me think my talents must lay elsewhere. I'm sure it eases you into it Thank you for letting us know!