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  • Term:
    Term: min 92 days, max 183 days
  • Loan limit:
    Loan limit: 100 000 - 5 000 000 VND
  • Interest rate:
    Interest rate: 10,95 - 14,6 %/per annum

Knowing the information about how to calculate interest on a bank loan is the simplest and most accurate repayment plan. So, how is the formula for calculating bank loan interest rate? All will be answered by CashBerry in the following article.

Knowing the information about how to calculate interest on a bank loan is the simplest and most accurate repayment plan. So, how is the formula for calculating bank loan interest rate? All will be answered by CashBerry in the following article.

Through many forms of loans at banks such as mortgage loans, unsecured loans, people easily access capital to meet consumption and business needs. For each loan package, the bank has its own regulations on limit, time as well as interest rate. In particular, how to calculate bank interest by month and year is always the top concern of many people. Currently, the bank is applying many forms of interest calculation such as fixed interest rate, floating interest rate, calculating interest on decreasing outstanding loans, interest on installment payments, ... In this article, CashBerry will guide you You can calculate all types of interest easily, quickly and accurately.

Bank interest rate

What is interest?

The simplest definition: "The interest rate is a certain percentage that the owner of the money gets when he lends his money to others".

There are many types of interest rates in the financial markets and in real life of people such as:

+ Types of interest rates people have contracted by themselves - not announced such as: Hot interest rates , fast interest rates, gangster hot interest rates, mortgage interest rates, ...

+ Listed and announced interest rates such as: Bank interest rate, discount rate, interbank interest rate, domestic currency interest rate, foreign currency interest rate, ...

In today's article of CashBerry, we only go to analyze the area of ​​bank interest rates and how to calculate the bank interest rate when borrowing money.

What is bank interest?

- Bank interest rate includes 2 main types: loan interest rate and deposit interest rate.

=> Thus, the bank interest rate is a certain percentage that the bank pays to the savings depositors or the bank receives when giving money to people to borrow money for business or consumption.

=> For example:

+ You have 1 billion VND in savings at Agribank, 01 month period, the current interest rate for 01 month is: 4.3% / year.

+ And you borrow 1 billion VND from Agribank with a term of 01 year, the current interest rate applied by Agirbank is: 8% / year.

Bank loan interest rate

What is the bank loan interest rate?

Loan interest or loan interest rate: is a certain interest rate that the borrower must pay to the Bank when the loan is due. There are many types of loan interest rates. Depending on the time perspective or on the specific characteristics of each loan product, we will have many different types of loan interest rates. Details are as follows:

Loan interest rate over time

a. Short-term loan interest rate

Short-term loan interest rate is the interest rate applicable to loans with a term of 12 months or less such as: mortgage loan, overdraft loan, credit limit loan, consumer loan of 12 months.

b. Medium - long term loan interest rate

Medium and long term loan interest rate is the interest rate applicable to loans with a term of more than 12 months, such as:

● Consumer loans, home loans, home construction, business loans, fixed investment loans, car loans, ...     

● These loans usually have terms from 24 months to more than 20 years.     

Loan interest rate by subject

a. Personal loan interest rate:

Applicable to borrowers who are individuals borrowing: including loans such as: buying a house for living, buying a car, borrowing for personal consumption, borrowing money for studying abroad, ...

b. Corporate loan interest rate:

Applicable to borrowers who are economic organizations or companies, including loans such as: Loans for business operations, loans to buy factories, loans to buy machinery and equipment for production and business. loans related to import and export financing activities of enterprises.

Types of interest rates for bank loans

Fixed interest rate

As its name implies, a fixed rate is an interest rate that is fixed at the beginning of the loan and during the settlement. This rate will not change no matter how volatile the market is. Therefore, borrowers can avoid the risk of high market interest rates. You can also easily calculate the amount of interest to pay in the first place to prepare a business plan.

The biggest disadvantage of this bank loan interest calculation is that it will lose money when you decide to borrow at a time when the market interest is high and when the market is low. 

* An example of how to calculate interest on a fixed bank loan is as follows:

Borrow 100,000,000 VND for 1 year term with fixed interest rate of 12% / year. So the monthly interest payable will be: VND 1.00,000 (100,000,000 x (12% / 12)) during a year.

Floating rate

Floating rate is understood as the interest rate that changes according to the fluctuations of the money market. With this calculation, both the bank and the borrower both benefit and create a sense of fairness, not being disadvantaged by market fluctuations.

However, for those inexperienced, it will be difficult to calculate the interest rate of bank loans at first when choosing floating interest (change, fluctuation). It is also difficult to foresee market movements. If the interest rate market goes up, we also have to pay more interest. Each month (or more depending on the loan package), the interest rate will be adjusted and borrowers must pay interest periodically according to the listed bank interest rate. Therefore, you also cannot calculate the amount of interest you have to pay in advance (although the difference between months is rarely too high for small and medium loans). 

Mixed interest rate

This is the most commonly used interest calculation method today. Simply because it combines the advantages of both fixed and floating rates. Accordingly, borrowers can apply both fixed and floating interest rates when borrowing money. In the beginning, a fixed rate will be applied and often an attractive rate to attract customers. Floating rate applies after a period of time.

When choosing this form of loan, borrowers will benefit in the first period because of preferential interest rates from banks. Especially for those who borrow money to start an initial business, it will be more beneficial. Its downside is similar to the above floating rate when it comes to the later adoption period.

* Mixed interest rate example:

Get a loan of VND 100,000,000 from the bank with a compound interest rate of 12% within 1 year. During the first 6 months, when the fixed interest rate is applied, the interest payable every month will be 1,000,000 VND (for example, in the section Fixed Interest). After 6 months according to market fluctuations.

Formula for calculating interest rate for bank loans

Similar to deposit interest, different banks will have different ways of calculating interest. However, we should only mention the current main loan interest calculation formula that large banks are applying such as:

● How to calculate loan interest at Agribank, how to calculate loan interest at BIDV     

● How to calculate loan interest at Vietcombank, how to calculate loan interest at Vietinbank     

The formula for calculating loan interest is as follows:

Loan interest = [(Loan amount * Loan interest rate) / 365 days] * actual number of loan days in the period

Practical example: You borrow 500 million VND from BIDV bank - 12 month term from 01/01/2018 to 01/01/2019, the interest is paid monthly, the principal at the end of the term with the 12-month interest rate is: 10 years

=> We have the following formula:

* Interest payable for January 2019 (January has 31 days)

Interest in January = [(500,000,000 VND * 10% / year) / 360 days] * 31 days = 4,305,556 VND

* Interest payable for February 2019 (February has 28 days)

Interest in February = [(50,000,000 VND * 10% / year) / 360 days] * 28 days = 3,888,889 VND 

How popular bank interest calculation today

Currently, banks in the market are applying 4 popular methods of calculating monthly bank interest rates: fixed interest rate based on principal balance, interest rate on decreasing balance, floating interest rate and compound interest. Specifically, the formulas for calculating bank interest rates by month are as follows:

Fixed interest rate calculation (based on principal balance)

With this method, the interest rate will be set from the beginning, the customer will have to pay the interest during the period specified in the contract. This interest rate will not be changed over time, this avoids the risk of interest rate fluctuation.

Formula for calculating the monthly bank interest rate based on the principal balance:

Monthly interest = loan amount * interest rate / 12 (month)

Example: Customer borrows money from Vietcombank with the amount of VND 50,000,000 in 12 months, the interest rate is 12% / year. Based on the calculation of the above bank loan interest rate, the amount the customer must pay monthly is as follows:

● Monthly interest = 50,000,000 * 12% / 12 = 500,000 VND.     

● Monthly principal amount = 50,000000 / 12 = 4,166,667 VND.     

● Total monthly payable = 4,166,667 + 500,000 = 4,666,667 VND.     

How to calculate interest rate by reducing balance

That is, the interest amount will be calculated according to the actual outstanding balance. Accordingly, the interest rate will decrease month by month because the principal has been subtracted by the customer in the previous months.

Example: Customer borrows VND 50,000,000 within 12 months with interest rate of 12 months. Thus, the principal monthly payable amount will be VND 4,166,6667. The method of calculating the bank loan interest rate based on the decreasing balance will be as follows:

● First month: 4,666,667 + 50,000000 * 12% / 12 = 4,666,667 VND.     

● Second month: 4,166,667 + (50,000,000 - 4,666,667) * 12% / 12 = 4,166,667 + 453,333 = 4,620,000 VND.     

● Third month: 4,166,667 + (50,000,000 - 4,666,667 - 3777,778) * 12% / 12 = 4,166,667 + 415,556 = 4,582,223 VND.     

● For every month, subtract the previous month's payments and add interest until the end of the loan.     

How to calculate floating interest rate

With floating rate method, the interest rate will be adjusted and changed from time to time. Accordingly, the floating interest rate can increase or decrease depending on the market. Formula to calculate the floating bank loan interest rate with the initial interest rate:

Monthly payment = (loan amount * fixed interest rate) / 12 months

During the initial loan period, the interest rate will be calculated according to the regulations stated in the contract. After the interest rate incentive period expires, the bank will calculate the fluctuations and changes of the market. The calculation formula would be:

Monthly payment = (loan amount * floating interest rate at the time) / 12 months

Example: Customer borrows VND 500,000,000 for 12 months, interest rate is 10% in the first 6 months. After 6 months, the bank will float according to the market. Applying the following floating rate formula:

● Amount payable in the first 6 months: (500,000,000 * 10%) / 12 = 4,166,666 VND.     

● To the 7th month, for example, the interest rate is 8% / year: (500,000,000 * 8%) / 12 = 3,333,333 VND.     

● Similarly, the months 8,9,10,… will be calculated according to the change in interest rate, the interest rate may be lower or higher than the initial interest rate specified in the contract.     

How to calculate compound interest

This type of interest rate is quite popular at banks, especially home loan and car loan packages. With this bank interest rate calculation, customers will apply fixed interest payments with floating interest rates. At first, the bank will calculate the initial interest rate, after the preferential period will float.

Example: A customer borrows VND 500,000,000 to buy a car, with a loan period of 10 years. Interest rate in the first 2 years will be 8% / year, then floating 10.5% / year. Thus, the amount of principal and interest that customers have to pay monthly will be:

● Monthly payment (first term): 7,500,000 VND.     

● Maximum monthly payment: VND 7,666,667.     

● Total payable amount: 742,083,312 VND.     

● Total interest payable: 242,083,312 VND.     

Which bank loan interest rate is the most beneficial?

After learning about the interest rate method, many people will assume that calculating the interest rate on reducing balance will pay less interest than principal balance. However, in reality, the amount that customers pay at the end of the contract is almost the same.

As for the form of calculating the interest rate based on floating balance, there can be 2 cases. First, customers bear lower interest rates. Second, bear higher interest rates due to market volatility. Therefore, this approach can bring risks to the borrower.

To know which bank loan interest rate is most beneficial, you can learn the advantages and disadvantages of each loan method:

Fixed interest rate

Customers will know for sure how much principal and interest each month they have to pay because the interest is fixed during the loan term. This will help you be more proactive in your debt repayment plan and finances.

The interest rate based on the outstanding balance gradually decreases

The amount of interest payable monthly will gradually decrease, which helps customers feel less pressure on interest.

Floating rate

You cannot know in advance how much you will have to pay in the future, so there is a volatility risk. However, if you understand the trend of interest rates and understand the increase / decrease period, this is also a wise choice. If interest rates fall, it is the right choice, otherwise, if interest rates rise, you may face the risk of exceeding your ability to pay.

From the analysis of the advantages and disadvantages above, it can be seen that the form of the initial fixed interest rate and the reduced interest rate will help you avoid the risk of high interest bearing. Ideally, when borrowing money, you should ask your bank staff to do specific calculations and detailed advice of payment methods to compare and make the best decision. 

3 Things to know about interest rates when you borrow money at the bank

Interest rate is an important issue in the loan contract, in many cases the borrower must struggle to pay interest. Here are some important shares of CashBerry to help you keep in mind interest rate issues when you borrow.

Firstly, the interest rates are as follows:

Article 468 Civil Code 2015 stipulates

- Interest

* Case 1: The parties have the right to agree on the interest rate but must not exceed 20% / year of the loan. Where the agreed interest rate exceeds the limited interest rate specified in this Clause, the excess interest rate shall be invalid.

* Case 2: In case there is an agreement on interest but the interest rate is not specified, when there is a dispute, the interest rate is 10%.

According to the formula: Principal x agreed loan interest x term of the loan contract

- Late payment interest on principal: If you delay paying interest as committed, you will have to pay the interest rate equal to 50% of the original agreed interest rate, according to the formula:

(Principal x agreed interest rate x loan contract term) + 50% original interest rate

(Point a, Clause 5, Article 466 Civil Code 2015)

- Interest on unpaid overdue principal:

Equal to 150% of the contractual interest rate corresponding to the late payment period. Unless otherwise agreed, follow the formula:

Principal x (150% x interest rate under contract) x overdue period

(Point b, Clause 5, Article 466 Civil Code 2015)

>>> Thus, according to the provisions of the law, the borrower only has to pay 3 interests as prescribed above. Any other interest will not be accepted.

Second method of interest payment:

- Decreasing balance: interest will only be calculated on the actual amount you owe, after subtracting the principal amount you have paid in the previous months.

- Calculate the interest on the original outstanding balance: the monthly interest is fixed throughout the loan term.

>>> Note: With the calculation on the original balance, the interest rate will be maintained throughout the loan term, the monthly payment is fixed without having to recalculate each month. However, if the customer chooses this method, the interest rate must actually be much lower than the decreasing balance applied at the same time; at the same time, should not choose too long loan period. The longer the loan period means the higher the interest payable by the customer, the hard to accept interest rate on the capital.

In case the customer chooses to borrow by the method of calculating interest on the reducing balance, the interest payable to the bank is based on the principal at that time. However, borrowers face the risk that the interest rate will change in the following months, which cannot be expected because the bank always applies the interest rate in real time and… is beneficial for the bank.

In fact, in recent years, there are cases when customers borrow, the initial interest rate is only 11 - 12% / year, but then the interest rate is up to 24-25% / year , leading to a sharp increase in interest on the bank. .

Third, be aware of the penalties

A bank offering low interest rates often comes with a very high penalty to compensate for low interest, which is usually a penalty for early repayment.

With the above shares, borrowers need to note the interest they must pay including what kind of interest as well as how much the ceiling is to avoid anti-interest interest and exceed the prescribed interest rate.

Above is information on how to calculate bank interest by each method that you can refer to. Hopefully, with the above monthly bank loan interest calculation formulas, you will be more active in finance as well as choose the most suitable interest calculation method. Besides, if you need to borrow money online to consume from 1-10 million fast a day, contact CashBerry. CashBerry - an online financial advisor will help you find the best loan package for you.

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