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Difficulties with HSBCs APR calculation

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  1. #1

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    Question Difficulties with HSBCs APR calculation

    Somehow I don't really understand HSBCs APR calculation used for their Personal Loans on their website.

    On below website they claim to have an offer with special interest rates:
    Interest Rate Table for Personal Instalment Loan - HSBC in Hong Kong

    Let's say I'd be interested in a HK$ 100,000 loan with a duration of 12 months, the table tells me that the monthly flat rate is 0.39% per month. Furthermore an APR of 9.03% is mentioned.

    Yet, the same table mentions a monthly repayment amount of $87.30 for every $1000. Thus my monthly repayment would be 100x$87.30=$8730.
    $8730 * 12month = $104,760.

    To me that somehow makes an actual interest rate of 4.76%pa.
    Where does the mentioned 9.03% APR come from?

    Handling fee of 1% is waived for this "special offer" and there's even a cash reward of $3,700 which I haven't even included in my calculation; yet I get a lower APR.
    Any ideas?

    Where's my mistake? I guess I seem to be misunderstanding the meaning of APR...please help


  2. #2

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    However they get to it, trust it - the whole point of legally mandated APRs is that they tell you what it really costs.


  3. #3

    Join Date
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    Under the code of practice you can actually ask them how they have worked it all out.


  4. #4

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    Quote Originally Posted by PDLM:
    However they get to it, trust it - the whole point of legally mandated APRs is that they tell you what it really costs.
    Hey PDLM, so would you say that my calculation is actually correct but I'm obviously missing something that's not mentioned on the page or that I've skipped?


    @mik.wat
    I guess I'll visit them tomorrow then or give them a call accordingly.

  5. #5

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    APR as given by the bank is correct.
    Though you have borrowed the funds for 12 months, because you are repaying every month, the effective period of the loan is approximately 6.5 months.

    altralazer likes this.

  6. #6

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    Quote Originally Posted by altralazer:
    Hey PDLM, so would you say that my calculation is actually correct but I'm obviously missing something that's not mentioned on the page or that I've skipped?


    @mik.wat
    I guess I'll visit them tomorrow then or give them a call accordingly.
    No, the calculation is wrong - since you are re-paying part of the principal every month, the average balance over the life of the loan (or conversely the average life of the full loan amount) is much lower.
    altralazer likes this.

  7. #7

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    Quote Originally Posted by Oldtimer:
    APR as given by the bank is correct.
    Though you have borrowed the funds for 12 months, because you are repaying every month, the effective period of the loan is approximately 6.5 months.
    Although the terminology is off a little bit, what Oldtimer is saying is pretty much correct.

  8. #8

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    Ahhhh there had to be something!
    Got it now! No hidden calculations (at least none that I know about so far), it's the ratio of repayment & interest...THANKS GUYS!