Representative Example

Meaning and Definition

A representative example is a standardized format of presenting the key terms and costs associated with a financial product, such as a car finance agreement. It includes important details such as the loan amount, interest rate, fees, repayment period, and the total amount repayable. The representative example is designed to provide borrowers with a clear and consistent way to compare different loan offers from various lenders.

Why it is important to know

The representative example is important for borrowers as it provides them with a standardized format to evaluate and compare loan offers. It allows borrowers to understand the key terms and costs associated with the loan, enabling them to make an informed decision about the affordability and suitability of the loan for their needs. By comparing representative examples, borrowers can easily compare different loan options and identify the most suitable one for their financial situation.

Example in car finance

A representative example for a car finance agreement may look like this

• Loan amount £15,000
• Interest rate 5% APR
• Duration 48 months
• Monthly repayment £350
• Total amount repayable £16,800

This representative example provides potential borrowers with a clear overview of the key terms and costs associated with the car finance agreement. It allows borrowers to compare this example with representative examples from other lenders to assess the affordability and determine which loan offer best meets their needs.