The mathematics of Interest Rates
When the urge of seeking quick cash hits in, some of us don’t do their homework when it comes to interest rates associated with pawnbroking loans and end up wasting money that could have easily been avoided. In this article, we will tackle the mathematics of interest rates and show you how much you could be saving by doing a little bit of research and comparing.
Testing the waters
So how to get the best interest rate possible on the market? Before you ask yourself this question, you need to know who are the players in the game. For confidential and respect towards healthy competition, we will not name any pawnbrokers in London, however we will definitely use representative examples with their numbers and directly compare it with ours so you can see the big picture. When you need a loan, as an informed consumer your primary task is making sure you’re getting the highest possible amount for your item and pay the least possible interest fees no matter how long your agreement’s period.
If you are a visual person like myself, I would like to break it down more thoroughly with actual calculations to show you how Fast Credit UK is one of the only pawnbrokers in the greater London area who will maximize your savings and minimize your spending.
Those who are new to pawn loans will frequently question the cost of interest rates. Are they overpriced or fairly affordable?
Competition can be quite ferocious among pawnshops. The best way to find out where you should go is visiting each pawnbroker’s website and see if the rates are mentioned there to begin with. If not, we strongly recommend you take a pen and a notepad, call each pawnbroker individually and ask them how much their interest rate is for the amount you are roughly asking for.
Fast Credit UK’s interest rates goes as follow: 4.99% for loans up to £1000, 3.99% if between £1001 - £2500, 2.99% if between £2501 - £5000 and last but not least (hold your breath) 1.99% for loans of £5001 and more.
Now let’s look at it more in details by comparing with some of the rates offered by the competition.
Meet Alex, a plumber from London in his late thirties. Alex got a last minute call from his best friend telling him that after speaking with other mutual friends, they came up with the idea of going on a 2-week vacation trip to Cuba. Alex thinks this could be a good opportunity for a quick getaway with his childhood friend, although, he doesn’t have the money to buy an airplane ticket and hotel package at the moment since his boss is only paying him next week. He decides to pawn his 22-inch gold chain in order to get some extra cash and cover the expense.
Alex needs this loan for only a week, as he would prefer recovering his jewellery after repaying his loan plus interest.
After reaching out to a few pawnbrokers, one of them proceeded to the valuation stage. The purity is confessed as 22 carats with an 80g weight overall. Alex is presented with a loan offer of £1600 at 8.5% monthly interest.
Even though Alex can pay back the loan within a week, this pawnshop will fore charge the interest fee over the loan for the entire month in question.
Mathematically speaking, this would mean: £1600 x 8.5% = £136 (amount of interest to be paid over the loan if paid within a month). Total amount to be settled at the time of item’s retrieval = £1736.
Fast Credit UK is proud to offer a unique advantage known as the daily interest plan. This means if Alex becomes a customer of ours, this is how he would save money in this particular scenario: £1600 x 2.99% = £48 (amount of interest to be paid over the loan for a month).
Since Alex only needs the loan for a week only, then £48 / 30 days = £11.2 therefore, once Alex comes back from vacation, the total he would have to pay us back is £1611.2.
Now let’s see how much cash could Alex save compared to the competitor. £1736 - £1611.2 = £124.8!
That representative example is no science fiction, it could be a real-life scenario furthermore, it could be your reality. This is the same reason why here at Fast Credit UK we take the time to educate our potential customers to at least compare apples with apples and make sure they get the most juice out of it. It’s simple logic, why pay more in interest rate for approximately the same amount of loan? Let that sink in and happy pawning!