Hire purchase
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
20 April 2013
what is backward caluclation method in hire purchase??how is it caluclated?
06 June 2013
How are interest rate and hire purchase instalment calculated on a fixed rate hire purchase (HP) financing?
FIXED RATE FINANCING: Calculation of term charge and HP instalment
Term charge on a fixed rate HP financing is calculated on the initial amount financed. See example:
Amount financed RM50,000
Term charges (Interest rate) 10% per annum
Tenure (Repayment period) 5 years (60 months)
Interest charged (Amount financed) x (Rate) x (Years)
= RM50,000 x 10% x 5
= RM25,000
Annual percentage rate = 17.3%
The monthly instalment is calculated as follows:
Monthly Instalment
= Amount financed + Total interest on amount financed
Repayment period (months)
= RM50,000 + RM25,000
60
= RM75,000
60
= RM1,250
Since term charges are calculated on the initial amount financed, you will get a rebate on the term charges if you repay in full the balance due under the hire purchase (HP) agreement.
Using the earlier example, where your HP tenure is 5 years (60 months) and you would like to pay off your loan after paying 48 monthly instalments, you will get a rebate on the term charges for the remaining 12 months (i.e. 60 months - 48 months = 12 months). The calculation of rebate is as follows:
Total term charges on the amount financed is RM25,000.
Calculation of rebate on interest:
Rebate on interest
= RM25,000x(1+2+3+...n)
(1+2+3+...k)
where:
n = remaining repayment period (in months)
i.e. 12 months
k = original repayment period (in months)
i.e. 60 months
Rebate on interest
= RM25,000 x (1+2+3+...+12)
(1+2+3+...+60)
= RM25,000 x 78
1,830
= RM1,066
FIXED RATE FINANCING: Calculation of term charge and HP instalment
Term charge on a fixed rate HP financing is calculated on the initial amount financed. See example:
Amount financed RM50,000
Term charges (Interest rate) 10% per annum
Tenure (Repayment period) 5 years (60 months)
Interest charged (Amount financed) x (Rate) x (Years)
= RM50,000 x 10% x 5
= RM25,000
Annual percentage rate = 17.3%
The monthly instalment is calculated as follows:
Monthly Instalment
= Amount financed + Total interest on amount financed
Repayment period (months)
= RM50,000 + RM25,000
60
= RM75,000
60
= RM1,250
Since term charges are calculated on the initial amount financed, you will get a rebate on the term charges if you repay in full the balance due under the hire purchase (HP) agreement.
Using the earlier example, where your HP tenure is 5 years (60 months) and you would like to pay off your loan after paying 48 monthly instalments, you will get a rebate on the term charges for the remaining 12 months (i.e. 60 months - 48 months = 12 months). The calculation of rebate is as follows:
Total term charges on the amount financed is RM25,000.
Calculation of rebate on interest:
Rebate on interest
= RM25,000x(1+2+3+...n)
(1+2+3+...k)
where:
n = remaining repayment period (in months)
i.e. 12 months
k = original repayment period (in months)
i.e. 60 months
Rebate on interest
= RM25,000 x (1+2+3+...+12)
(1+2+3+...+60)
= RM25,000 x 78
1,830
= RM1,066
Message likes :
1 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Gst credit note by supplier
- Due date for filing return for the partner in partnership subjected to Tax Audit
- Missed uploading GST Invoice
- Query on effect of registration of property
- Movement of goods by packers and movers - type of sale - Reg.
- Wrong CMPo8 file
- GST on reimbursement of expenses
- Gratuity paid to legal heir above 20 lakh is taxable or not
- Opting out" of regime provided under subsection (1A) of Section 115BAC but Form 10IEA is not filed.
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
- Need to correct "Whether it is last installment " response in Form 26 QB
- " Income from House Property " in joint names of co-owners
- REGARDING TDS RETURN OF FORM 27Q
- Notice under e-Verification Scheme
- GST demand notice for ITC reversal against exempted supply.
- RCM ON SECURITY CHARGES FROM INDIVIDUALS
- How to get money back from delisted company
- ITC not to be taken in accounts & GSTR-3B
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
