One question we get asked a lot is, ‘If there’s no interest added to your loans, what’s an APR figure doing in the small print?’
It’s a good one and one we’re always happy to answer.
As a lender we do things differently, so instead of adding interest to a loan, we’d rather give you a no-interest loan and charge you a membership fee that is spread over the year. We believe this is a simpler, clearer and more honest way of doing business. It also means that as a member you know you’ll never ever pay more than £72 a year if you are a Core Member of £96 if you are a Plus Member.
This means you can budget and plan for your credit needs. This has never been done before and most of our customers love it!
But how do you know if that's cheaper than borrowing on your credit card, or dipping into your overdraft, or getting a loan from someone else?
This is where the APR figure comes in. It stands for annual percentage rate and it levels the playing-field when it comes to lending, making it easier to compare different types lending across different types of lenders. It works really well for loans that are one year or longer (since its an annual number).
However, If you define 'cheaper' by how much you need to pay, many people look at the total amount payable. In terms of how much you will pay, in pounds and pence, Creditspring is one of the cheapest ways to borrow £250 or £500 twice a year. Even cheaper than the average cost of the top 5 banks arranged overdraft charges, assuming you borrow and repay in the same way required by Creditspring.
Our APR is higher than many because we collect our loans faster than other lenders. We do this because this is what our members asked us. Often times they want to be in debt for as little time as possible. One consequence of us collecting money faster is that our APR ends up being higher. But our total charge does not change.
In short, by including our APR figure we are fulfilling our commitment to be as open and as transparent as possible. And we trust that our members still see value in our product, but we understand the confusion.