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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.

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: 275 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.