Usa
Essay by review • December 1, 2010 • Essay • 959 Words (4 Pages) • 1,069 Views
By applying the following formula, the consumer
should be able to make his/her own informed
decisions as to what the true interest charges
are, regardless of what the lending institution
has indicated.
The formula is
Where:
Interest 2*T*C T = Time
Rate = P(N+1) (No. of payments
in one year)
C = Charges
2 = a constant used in the (Finance)
formula. (This reflects P = Principal
a doubling of interest (Amount of credit)
costs because the bor- N = No. of payments
rower has entire amount
of loan, or credit, at
the beginning of the
loan period. Therefore,
on the average, the
consumer has use of
only half of what is
borrowed, thus approx- Press .
imately doubling the
interest rate.)
It is important to understand the impact time has
upon determining the true interest cost for credit.
There are basically two forms of credit obtained by
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