1 Toby has been listening to his friend Greta and decided to invest in renewable energy and install solar panels to his cottage. The total cost of the solar panels is £4,000. However, he doesn’t have the money to pay the full amount upfront so is looking at two different financing options.
Option A is to buy it partly on his credit card which has an APR of 27.9%. Toby has no outstanding credit on the card at present, but he’ll have to use up his whole credit limit. Even then, he will need to find £1,200 from elsewhere, which he can just about scrape together, but it will wipe out his savings.
He would then aim to pay off the credit card by paying £75 per month.
Option B is the credit deal offered by the retailer. He can pay a fixed sum each month, spreading the cost over 36 months at an APR of 15.8%.
3.1 Briefly explain what APR is and what someone shopping around for credit might use it for.
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