Understanding the interest rates (APR, simple interest rate and effective interest rate)

Rates are based on several variables, relating to both you as the applicant, and the quality of credit information that we can obtain for you. Other factors that could affect the interest rate for your loan offer include your ability to afford repayments on the loan, our cost of capital for your school, and other market rates that you may have access to. We typically provide the most competitive rate upfront, but your rate may change based on information contained in your credit report, which is obtained later in the application process.

When comparing your offer to other financing opportunities, note that ‘APR’ is not the rate at which interest will accumulate on the loan, but rather a legally-mandated rate that includes the effect of all financing costs (i.e., factoring in fees, and the effects on interest). There are no fees for early repayment, and no surety agreements or other contracts that must be entered into in tandem. To learn more about APR, have a look at this short video.

We calculate the APR in accordance to the FCA guidelines stated in CONC App 1.1.9

The Annual Percentage Rate (APR), assuming no change in the Base Rate and repayment schedule, reflects what the loan will cost you each year for the total length of the loan. The total length of the loan can be calculated as the length between the first disbursement date up until the last repayment date. The APR considers the administration fee (if any) as well as interest accrued during your grace period.

As a reminder, Prodigy Finance uses a simple interest product. Interest is calculated daily and is accrued monthly from each Disbursement Date for the APR calculation. Interest accrues on your “Outstanding Principal Balance”, which initially consists of your Total Amount Financed, or such part of it as has been disbursed if it is not yet fully disbursed. Your Outstanding Principal Balance will increase with any further disbursements.

Unpaid interest is capitalised once on your first Loan Repayment Date in this calculation and becomes part of your Outstanding Principal Balance. After that, your Outstanding Principal Balance decreases with each assumed monthly repayments of principal.

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