How is the APR calculated?
APR stands for Annual Percentage Rate, and is a way of comparing the cost of loans from different providers. It takes into account all the interest and charges that are payable on a loan, and so shows you the actual cost of the loan. The APR on Zopa loans covers both the interest you pay to lenders and the £118.50 Zopa fee. The amount of interest you pay to lenders is determined by the rates they’re offering their money at – Zopa is a marketplace, and the rates on Zopa loans are set by our lenders.
A. One common situation that occurs when a borrower receives a Reg Z, and a copy of their note, is the column that indicates the amount financed is less than the loan amount the borrower is actually financing. It is here that many borrowers leap before they look and call to find out why they are only receiving a $146,925 loan when they applied for a $150,000 loan. It is here that APRs enter the picture. Let’s look at how APRs are calculated. For our illustration we will assume a 8.50% fixed rate interest. For a 30-year loan the monthly payments for a $150,000 loan are $1,153.37. In order to calculate the APR for this loan we subtract $2,250.00 (1.50 points), $275.00 appraisal fee, $50.00 credit report fee, $500.00 processing, document and other fees. ($150,000 – $3,0750 = $146,925). The $146,925 is then used as the present value/loan amount to determine the true cost of this loan. By solving for the new interest rate for a $146,925 loan with the same payment of $1,153.37, the APR is ca
