I have a query about calculating APR on a loan.
I just got the following quote for £6k over 12 months from ZOPA
"Based on your credit rating you can borrow from the A market at 7.30%.
Your monthly repayment would be £519.34 Your total repayment would be £6,232.14 (includes 0% Zopa fee of £0.00) The APR for this loan would be 7.30%"
Now, so far as I understand it, the APR reprensents the true annualised cost of the loan including all fees. AFAII, the pattern of cash flows for this loan would be:
Month DR CR
00 6000.00 01 519.34 02 519.35 03 519.34 04 519.35 05 519.34 06 519.35 07 519.34 08 519.35 09 519.34 10 519.35 11 519.34 12 519.35---------------------- Total 6232.14 6000.00
----------------------
So the loan would cost me £232.14 in interest.
Now, to my simple brain, it looks like you've got value of £3000.00 across the year, because you're paying down the borrowing in a straight line.
Calculating £232.14 / £3000.00 give me 7.74%, not the 7.30% quoted.
Where have I (or, less likely, Zopa) gone wrong ?
Nick