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Saturday, November 28, 2009

Understanding the 4 Types of Bank Loan Interest

Lending money to the bank will always be followed with interest. While different types of loans, also different types of flowers. In order not caught interest loans, identify type:

1. Fixed interest
The interest rate will change during a certain period according to the agreement. If market interest rates change (up or down), a bank or financial institution will remain consistent in interest rates that have been set.

2. Floating Interest
Interest rates will follow the ups and downs of market rates. If market rates rise, the mortgage interest will go up. And vice versa. This system is applied to mortgages, working capital loans, business, and investment.

3. flat interest
In this system, the amount of debt payments of principal and interest each month the same amount. Interest is intended as a short-term credit vehicle loans and KTA.

4. Effective interest rate
The calculation of interest expense is calculated each end of the installment payment period based on the principal balance. Thus, interest expense will decrease each month because of debt principal to be reduced.

5. anuity interest
In the calculation of annuities, the portion of interest in the early days very large, while the main portion is very small installments. However, near the end of the term, things will turn around.