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
- Tax on Amount transferred in HUF Account
- Nursery business
- GST REFUND ISSUE ON PURCHASE OF PLANT AND MACHINERY
- Working on Gold wastage during Melting of old gold jewellery
- TDS on Dashcam rent and allied services
- Condonation Request sec 119(2) b -Enhancement Limit of Leave Exemption prior to AY 2023
- ETDS return q4 25-26
- Section 269ST applicability for capital introduced by partner to his partnership firm
- Intimation under section 245
- Royalty payments to the Mining Department for procurement of murum - GST input
- HOW TO ADJUST CREDIT NOTE AMOUNT ?
- Import Order Cancelled.
- WRONG GSTR7 ENTRIES ACCEPTED ERRONEOUSLY
- Expert Help Required for TDS Refund 100000 Through TRACES – AY 2022–23
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
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
