Did Republic Finance list the wrong APR?

[Anonymous]

Hey Fico Fam!

I got this loan pre-approval in the mail today and I'm thinking about taking the offer because

1) I don't have any open loans, and if I'm right, adding one will help my score by giving me a credit mix

2) the finance charges are approx. 40% of what I would be borrowing, which isn't horrible considering I am still rebuilding, and

3) the monthly payments are reasonable and affordable ($85 for 12 months but I would pay more if it would decrease the interest)

The only thing is, the math in the Truth In Lending section doesn't add up. Everything makes sense except the APR. According to my math, the finance charges equal to about 40% of the amount financed, but on the paper it states an APR of 68%. Maybe I'm confused on how APR is calculated. This is how I figured it:

Amount borrowed: $722.56

Amount charged: $297.44

Total: $1020

...ok, adds up so far...

APR: 68.98%

$722.56 x .6898 = $498.42, not $297.44 << this is where I get confused

Here is part of the letter:

Is the listed APR incorrect? Because I definitely won't accept it if it's that high.

Thanks in advance!

[gdale6]

Its correct. You are paying some principle each month so its not going to be as much interest as you calculated.

Print Schedule

Amortization Schedule
$722.56 at 68.98% interest
with 12 monthly payments
Total Payments: $1,020.00 Total Interest: $297.44

CalculatorSoup.com
Period #	Payment Amount	Principal Part	Interest Part	Balance Owed
1	85.00	43.46	41.54	679.10
2	85.00	45.96	39.04	633.14
3	85.00	48.61	36.39	584.53
4	85.00	51.40	33.60	533.13
5	85.00	54.35	30.65	478.78
6	85.00	57.48	27.52	421.30
7	85.00	60.78	24.22	360.52
8	85.00	64.28	20.72	296.24
9	85.00	67.97	17.03	228.27
10	85.00	71.88	13.12	156.39
11	85.00	76.01	8.99	80.38
12	85.00	80.38	4.62	0.00
CalculatorSoup.com

[Anonymous]

Please don't take the offer.  If you are looking for loan to boost your credit mix, this thread should help http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

And an APR of 68.98% is just... Is just.. I can't even say the word. Please think about it more.

[Anonymous]

If you have even $500 please get a secured loan. You can often get those under 5% and even around 2-3% at credit unions. Sure, loans help your credit (to an extent) but it's not worth spending THAT much for it. Yes, you have to pay for credit but you need to have some standards too. Please look at other options. This is not a good option IMO.

[Anonymous]

Ok. That APR calculation is really confusing! I'll just stick with my cards which are well below less than half that interest rate. Thanks for the advice everyone

[takeshi74]

---

@Anonymous wrote:

I got this loan pre-approval in the mail today and I'm thinking about taking the offer because

1) I don't have any open loans, and if I'm right, adding one will help my score by giving me a credit mix

2) the finance charges are approx. 40% of what I would be borrowing, which isn't horrible considering I am still rebuilding, and

---

Sounds like you have bigger issues that you can focus on before worrying about smaller factors like Credit Mix.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Don't just apply for credit for scoring purposes and don't let score dirve your decisions.  Select credit products that suit your requirements and consider your overall fiancial health as a bigger priority than score.  And don't just respond to offers.  They are just marketing.  Let your needs/wants determine the products that suit you -- not some company's marketing department.

[RonM21]

Good decision not doing that