Loan interest rates - how do they work
If one takes a loan and the interest rate is said to be 32% per annum - (compounded monthly). What exactly does that mean? How is this calculated monthly?
The key is to look at the APR rate, as that gives the true interest rate. There are many methods of calculating interest, but most will use a daily calculation which is either on a 365 days or 360 days calculation.
The other key area to look at is what else you are being charged, as credit insurance charges can add up to a hefty sum and therefore increasing your costs substantially.
Need debt counselling or consolidation?
Explore DebtBusters' solutions for reducing your interest rates and unlocking cash.
Find out moreOther charges will include a once off initiation fee and a monthly administration fee which cannot be more than R57. I think 32% is too high and if you are looking at this loan for covering previous debts, debt review is going to be better for you.
Please contact DebtBusters on 0869 99 06 06 for further assistance.
