The cost of credit – the truth about APRs


Consumers are using credit more than ever and spreading the cost is increasingly being seen as a smart financial decision by a broader range of people.

Some retailers and some consumers still have a negative perception of credit and APR’s when applied to retail finance. Yet figures released by the UK Finance show that every month we spend around £16bn on credit cards, which are often seen as the more ‘acceptable’ face of financing.

But what really is the impact of an APR?

Just how much does it cost to buy something on finance?

On a £1,000 loan over 12 months a consumer would pay the following amounts based on the following APR’s:

That’s the cost of a couple of lattes or a fancy burger a month. It shows that a slightly higher APR doesn’t mean extortionate costs for the consumer.

It’s also why 88% of consumers who were declined for their first finance offer were willing to take an alternative, sometimes at a higher APR. Consumers consider it worthwhile for a little more financial freedom.

Retailers however, often underestimate how willing their customers are to pay more. But we know, because our smart technology can offer customers declined for their original credit offer an alternative either with another lender and/or at another APR. Almost 9 out of 10 customers take the alternative because they’re happy to pay a few extra pounds to spread the cost.

Consumers aren’t scared of credit. 43% of the loans we process are for interest bearing credit and 99% of those are for loans under 20% APR. In fact, a fixed-term instalment loan often works out cheaper than a credit card because the debt is often paid off quicker.

Customers will and do, seek out retailers who offer credit – whether as an instalment or a branded credit card and we know 65% of customers only made their purchase because finance was available.

Specialist lenders and improved affordability checks ensure the right customer gets offered the right credit offer. No one wants consumers to get into debt. If offered and used correctly, credit should be a win-win-win for the lender, the retail partner, and the customer.

Consumers aren’t scared of credit and retailers shouldn’t be either.

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To offer finance through Deko, you will need:

  • Turnover of over £1m
  • Trading history greater than one year
  • Positive balance sheet

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