navva on Sun, 27 Feb 2011 09:21:00 +0100 (CET) |
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Re: <nettime> How a Library Saved My Life. - what can be done in regard to an unsustainable system of student loans |
On Feb 26, 2011, at 10:54 PM, Novica Nakov wrote: > > I hope you won't mind me setting a little test of financial >literacy. You buy a new ?1,000 computer and borrow money to pay for >it. You have a choice: either (a) pay 12 monthly instalments of ?100; >or (b) borrow money at an APR of 20 per cent, meaning you pay back >?1,200 at the end of the year. Which offer is better - or are they >(c) identical? (The answer is at the end of this column.) > > > The answer is (b). The instalment payments hide a deceptively high >interest rate. Because capital is being repaid almost immediately but >total interest is still ?200, the true interest rate is much higher >than 20 per cent. Reader Ian Nicol informs me that Excel uses the >formula (RATE(1*12,-100,1000)*12) to calculate interest rate, in this >case more than 35 per cent. ok, so, in the first instance I pay ?1200 over twelve months, but in your favored option, I pay the same amount to a bank or other lender at the end of the year. The effective interest rate may be significantly higher, but the benefit to me may be greater with option a, unless I am really missing something. I don't have to gin up a big lump sum and endanger my credit rating as well. There is a reason why usurious rent-to-own schemes exist. help me out here. martha rosler # distributed via <nettime>: no commercial use without permission # <nettime> is a moderated mailing list for net criticism, # collaborative text filtering and cultural politics of the nets # more info: http://mail.kein.org/mailman/listinfo/nettime-l # archive: http://www.nettime.org contact: nettime@kein.org