FYI: What a personal loan costs you (As on 27-12-17)

[swatkats]

Personal loans are a way to use tomorrow’s income today. Here are some loan rates and other costs of the top private and public sector banks in India.

Source: http://www.livemint.com/Money/nOyAz...personal-loan-costs-you-27-December-2017.html

 

[nimod]

useful info.
i hope i never have to..

 

[6pack]

i think my math must be wrong. i get 123.12 percent.

loan amount 100000. Interest rate ? EMI = 2565 /month EMI = interest per month right? Tenure = 4 years.
So 2565 x 12 = 30780. (already paid 30% of 1L here in first year)
30780 x 4 = 123120.
So % = (123120 / 100000) * 100 = 123.12

How is it 10.60% - 12.60%? Is it per month?

100000 + 23.12% = 123120. Its still above the 10.6 - 12.6% written.

I think it's like this:

(123120-100000)/100000 * 100 = 23.12% for 4 years. So if we divide the 23.12/4 = 5.78% per year? Weird. What is going on?

 

[rdst_1]

i think my math must be wrong. i get 123.12 percent.

loan amount 100000. Interest rate ? EMI = 2565 /month EMI = interest per month right? Tenure = 4 years.
So 2565 x 12 = 30780. (already paid 30% of 1L here in first year)
30780 x 4 = 123120.
So % = (123120 / 100000) * 100 = 123.12

How is it 10.60% - 12.60%? Is it per month?

100000 + 23.12% = 123120. Its still above the 10.6 - 12.6% written.

I think it's like this:

(123120-100000)/100000 * 100 = 23.12% for 4 years. So if we divide the 23.12/4 = 5.78% per year? Weird. What is going on?

EMIs are calculated differently. It's just a way to show lower interest rates while the effective rates are high.
Go to emicalculator.net and enter these values and effective rate comes to 18.8% instead of 10.6.

EMI is used to pay two components of the loan, principal and interest. For the 2565 you pay, some amount will reduce the principal while the other will be used to pay the interest.
The site I have mentioned above gives clear breakup of every month. That is what the entries in your loan passbook will look like.

 

[6pack]

nice informative site. price gouging by banks. why doesn't RBI ask them to put real rates?

 

[swatkats]

EMI calculator, They have a app. Been using it since a long time. Apparently a must have app for Indian mobiles.

 

[Lord Nemesis]

The interest on loans is calculated on a reducing balance method

lets say you took 100000 loan for a 1 year period @ 12% interest. 12% annual interest means monthly interest rate comes to 1%.

so every month you pay 1% simple interest on principal remaining at that time.

First month you pay 1,00,000 x 1% = 1000 rupees as interest and some amount as principal.
Second month, you pay 1% on the remaining principal and so on.

The EMI (Equated Monthly Installment) is calculated such that that each month you pay a fixed amount which contains both a fixed principal as well as the 1% monthly interest on the balance amount so that the the remaining principal becomes nil at the end of the loan duration.

Basically, it boils down to a sum of series whose simplification leads to below formula for EMI.

For the example taken above, the EMI comes to 8885/-

First month :: Interest (1% of 100000) = 1000 , Principal Repaid (8885 - 1000) = 7885, Balance (100000 - 7885) = 92115
Second Month :: Interest (1% of 92115) = 921, Principal Repaid = (8885 - 921) = 7964, Balance (92115 - 7964) = 84151

and so on.

When you make Fixed deposits, the bank gives you compound interest which is compounded quarterly. If we take the same example as above, quarterly interest rate is 3%.

First quarter:: Interest (3% of 100000) = 3000, Balance (100000 + 3000) = 103000
Second quarter:: Interest (3% of 103000) = 3090, Balance (103000 + 3090) = 106090
Third quarter :: Interest (3% of 106090) = 3183, Balance (106090 + 3183) = 109273
Forth quarter :: Interest (3% of 109273) = 3278, Balance (109273 + 3278) = 112551

So in comparison, if you take a loan, you pay 6619 as interest to bank because of the reducing principal every month, but if you put an FD in bank for 1 year, they pay you 12,551 as interest.[DOUBLEPOST=1514540623][/DOUBLEPOST]Just want to add that FD interest rates are always much lower than loan interest rates. For example, I pay 8.65% interest on my home loan while I get 6.75% (or lower) interest on FD's. Personal loans have much higher interest rates ranging from 11 to 17%.
Also, the interest earned from FD is deemed to be income and taxable based on your income bracket.