When borrowing money from a bank, we often pay attention to the interest rate and often listen to the advice of credit officers to know the amount to pay each month. So have you ever wondered how the interest rate on bank loans is calculated?
Let's find out through this article!
How does the State Bank of Vietnam regulate lending interest rates?
Pursuant to Decision 1813/QD-NHNN in 2022, the maximum short-term lending interest rate in Vietnamese Dong is prescribed as follows:
- Credit institutions and foreign bank branches (except People's Credit Funds and Microfinance Institutions) apply a maximum short-term lending interest rate in Vietnamese Dong of 5.5%/year.
- People's Credit Funds and Microfinance Institutions apply a maximum short-term lending interest rate in Vietnamese Dong of 6.5%/year.
Common ways to calculate bank loan interest rates
Currently, there are two popular ways to calculate bank loan interest rates: calculating interest based on the original balance and calculating interest based on the decreasing balance.
Calculate loan interest based on principal balance
With the method of calculating interest on loans based on the principal balance, the interest of each interest payment period will be equal throughout the entire loan period and is calculated based on the original principal amount.
The specific calculation formula is as follows:
Monthly interest = Principal balance x Loan interest rate/Loan term
For example, you borrow 36 million VND from the bank for 12 months with an interest rate of 12%/year.
- The principal amount to be paid to the bank monthly is: 36 million/12 months = 3 million VND
- The monthly interest payable to the bank is: (36 million x 12%)/12 months = 360,000 VND
- Monthly payment is 3,360,000 VND
Calculate loan interest based on decreasing balance
The method of calculating interest on a loan based on the decreasing balance is based on the actual amount owed after deducting the principal the borrower has paid in previous months.
The specific calculation formula is as follows:
- Monthly principal = Loan amount/Number of loan months
- First month interest = Loan amount x Monthly interest rate
- Interest for the following months = Remaining principal x Loan interest rate
For example, you borrow 72 million VND, for 12 months with an interest rate of 12%/year.
- Monthly principal payment = 72 million/12 = 6 million
- First month's interest = (72 million x 12%)/12 = 720,000 VND
- Second month interest = (72 million - 6 million) x 12%/12 = 660,000 VND
Do the same for the 3rd and 4th months until the debt is paid off.
Popular forms of bank loans
Depending on the loan purpose and personal conditions, customers can choose the appropriate loan form below:
- Unsecured loan : is a form of loan that does not require collateral, the bank relies on the customer's income and reputation to approve the loan limit.
- Mortgage loan : is a form of loan in which customers need to have collateral such as house, car, savings book to be able to borrow. Loan limit is approved based on the value of the collateral.
- Overdraft loan : a form of loan for individual customers when they need to spend more than the amount currently available in their payment account. Depending on their reputation, the bank will grant customers a maximum limit to be able to spend beyond the limit when the account balance is 0 VND.
If you are interested in credit card products or looking for loan packages, you can visit the website Banktop.vn to learn more.
BTOP - Providing advertising solutions on Website platform through access
BTOP (BTOP Company Limited) was established with the aim of providing advertising solutions for products and services for financial and banking units through a website platform based on user traffic.
Contact information:
- BTOP Company Limited
- Website: https://banktop.vn/
- Tax code: 0317779522
- Phone: 0909 023 278
- Mail: [email protected]
- Head office: 3rd Floor, An Phu Plaza Building, 117-119 Ly Chinh Thang, Vo Thi Sau Ward, District 3, Ho Chi Minh City
- Responsible for content: Nguyen Ba Thanh
Source
Comment (0)