Study Surgery

I work for a small building contractor. When arranging finance and exploring various finance deals, I find it difficult to calculate the different types of interest available on finance agreements, particularly the ‘flat rate of interest’ and the ‘annual percentage rate (APR)’. The lender will advise me of the APR (which they are now legally obliged to do) but I would like to be able to check this independently. Given the advance, associated costs of borrowing, term of repayment and interest charged, it would be useful to have an example to illustrate how these rates are calculated.

A: To be honest, the first thing I did was to go onto Google, type in ‘APR’, and click ‘search UK’. The top link on the list was the Financial Services Authority’s (FSA) website, ‘moneymadeclear’, at www.moneymadeclear.fsa.gov.uk.

This website explains APR in more detail than I could hope to do in this article. It also includes a loan calculator, which allows you to calculate loan repayments based on the information a lender will give you: www.moneymadeclear.fsa.gov.uk/products_explained/what_is_apr.html

It is worth having a good rummage around this site, as it has lots of useful information and is independent and impartial.

Accounting Technician - October 2007 - Page 32