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Interest On Loan ?

Sanjivkumar Shah (Account Manager) (286 Points)

28 June 2008

Hi Friends,

1. Hi can anyone suggest me regarding The Calculation method of Reducing rate of interest & Flat Rate Of Interest?.

2. How They Are Calculated. Recently my freinds has taken loan whose emi is 41748/- for one year for loan of 453000/-. Bank is charging me 19% of interest on Reducing Rate Of Interest but i am paying around 12% from my pocket. can you suggest me whether this deal is ok.

Regards

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6 Replies

Balaji Sarangarajan (MBA & (CA Final)) (1131 Points)
Replied 28 June 2008

Hi Sanjev

How many is this loan (i.e) your repayment term whether 48, 60 mths.

then we can find it out.

Regds

Balaji S.

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Sanjivkumar Shah (Account Manager) (286 Points)
Replied 28 June 2008

Hi Balaji,

Its for 12Months.

Regards

CA Naveen Kumar Agrawal (Chartered Accountant / MBA) (939 Points)
Replied 28 June 2008

emi of Rs. 41748 is fairly calculated as per information provided.

Because Present Value of 12 monthly Annuities Of Rs. 41748/- each, @ 19% p.a. comes to Rs. 453000/- which is your loan Amount.

Formula to calculate Present Value is

PV = (Annuity/monthly interest rate)*(1-(1/(1+monthly interest rate))^No. of months)

hereby i m attaching a xls file to calculate EMI as well as Loan Amount.

hope this will help u out.

Attached File : 9 pv calcu.xls downloaded: 364 times

CA Naveen Kumar Agrawal (Chartered Accountant / MBA) (939 Points)
Replied 29 June 2008

now i come to your second ques. which is the best plan & why?

and the answer is reducing balance method is the best out of two under given situation b'coz at flat rate of interest it comes to Rs. 54360/- (i.e. 453000*12%) while under reducing rate of interest it comes to Rs. 47976/- (i.e. 41748*12-453000). which saves your Rs.6384/- under later option.

Now choice is yours.