How to Calculate Loan Interest
Before you apply for a loan to a bank or loan via an online application, you should first understand how to calculate the percentage of loan interest. So you can ensure that the total credit installments (amount of loan plus interest) charged are correct. There are various types of loan interest, one of the most frequently charged to customers is flat interest and effective interest. The following is the calculation of interest from flat interest and effective interest.
1. Flat interest
Flat flowers are the easiest and simplest types of flowers. Usually motorbike loan brochures that explain the monthly installments in the motorbike price column use the flat interest method. In the type of credit with flat interest, the interest and ceiling values are calculated in a balanced manner according to the loan term or tenor.
To make it easier for you to understand the picture of calculating flat interest, here is an example of a case: Mr. Budi wants to apply for an unsecured loan of 120 million rupiah with a repayment period of 12 months and a flat interest charge of 10% per year. So Mr. Budi must pay the following installments:
- Loan amount: 120 million
- Interest per year :10%
- Term: 12 months
- Principal installment : Rp. 120 million : 12 months = IDR 10 million/month
- Interest : (Rp 120 million X 10%) : 12 months = Rp 1 million/month
- Monthly installments: IDR 10 million + IDR 1 million = IDR 11 million
Using the flat interest calculation above, the amount of installments that must be paid by Mr. Budi every month for one year is 11 million. The installment amount does not change because the flat interest is fixed.
2. Effective interest
This interest calculation system is commonly used for long-term loans such as applying for a home mortgage (KPR) or apartment ownership loan (KPA). In contrast to flat interest which is fixed, in the calculation of effective interest, the number of your installments will be less and less. This can happen because the interest calculation looks at the remaining value of the principal loan, namely the amount of debt that has not been paid every month.
Mr. Budi applied for a mortgage loan of 240 million with a credit term of 12 months, and was subject to an effective loan interest of 10% per year. So how many installments must Mr. Budi pay per month?
- Principal loan : Rp. 120,000,000
- Interest per year : 10%
- Loan tenor: 12 months
- Principal installment : Rp. 120,000,000 : 12 months = Rp. 10,000,000/month
- ((Rp. 120,000,000 – ((1-1) x Rp. 10,000,000)) x 10% : 12 = Rp. 1,000,000
- So, Mr. Budi's installment in month 1 = Rp. 10,000,000 + Rp. 1.000.000 = Rp. 11,000,000
Month interest 2:
- ((Rp120.000.000 – ((2-1) x Rp10.000.000)) x 10% : 12 = Rp. 916.667
- So, Mr. Budi's installment in the 2nd month = Rp. 10,000,000 + Rp. 916,667 = Rp. 10,916,667
And so on, until:
12 month interest:
- ((Rp. 120,000,000 – ((12-1) x Rp. 10,000,000)) x 10% : 12 = Rp. 83,333
- So, 12 month installments = Rp. 10,000,000 + Rp. 83.333 = Rp. 10,083.333
From the simulation above, you can see that there is a reduction in the installment value that must be paid by Mr. Budi from the first month, the second and so on. This is because the effective interest depends on the remaining principal of the loan in the following months. So that every month the interest and installments will be lower.
Make sure when you apply for a mortgage, you simulate this calculation so that the costs set correspond to reality. And adjust the loan to your ability to pay so that later it doesn't bring problems.
In addition to conventional financial institutions such as banks, you can also get business capital loans at the newbie online loans . the newbie also has low interest rates,
EmoticonEmoticon