Usa

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