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Not the OP but I always fail to see how this is useful in the real world (I'm sure you already guessed I'm no financial guru). Can someone please explain why i

• AlexandrB 5y ago
  I gave an example in another comment: https://news.ycombinator.com/item?id=29656265 https://news.ycombinator.com/item?id=29656265 Because the thing you're buying is short term, unsecured credit, it's generally pretty fungible. Regardless of the credit product - payday loan, credit card, line of credit, or something else - what you're paying for is immediate access to money. And in most cases, these products allow you to borrow as much (or as little) as you want - so you're not going to "overborrow". This is more like comparing the cost of buying 30L of water in 330ml containers for $2/ea vs. in 481ml containers for $3/ea except the math for compound interest is harder to do correctly.
• sofixa 5y ago
  The point is to have an equal point of comparison (APR or gallon or 100ml or whatever), so that the vendor can't trick you with numbers - e.g. a bottle of Fanta is 3 bolivars, a bottle of Sprite 3.5 bolivars, but the first one is 85ml, the second one 100ml. Most people wouldn't be able to do the math even if they immediately notice the difference in size/quantity. Same thing with interest. Unless it's normalised ( in a yearly equivalent), it's very hard to know how expensive the loan will be. That's why in France it's mandatory when advertising loans to state the yearly interest rate and the total amount paid in the end, just to be clear what you're getting into.