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Fin Shorts| February 24, 2023

How Personal Loan Interest Rate Calculated?

Below are the factors which contribute to the calculation of Interest Rate for Personal Loan

  • Interest rate: The interest rate is the main factor that determines the total interest on a personal loan. Higher the interest rate, higher the interest on the loan.
  • Loan amount: The amount borrowed also impacts the interest on a personal loan. The more you borrow, the higher the interest amount will be.
  • Loan term: The loan term, or the number of months over which the loan is repaid, also affects the interest. Longer loan terms generally result in higher total interest.
  • Compound interest: Some personal loans may have compound interest, where interest is calculated not only on the principal but also on the accumulated interest. This can result in higher overall interest.
  • Repayment frequency: The frequency of repayments also affects the total interest, with more frequent repayments typically reducing the total interest paid.
  • Early repayment: If you choose to repay the loan early, it could potentially save you money on interest.

Note: It is important to understand the loan agreement and the terms and conditions for calculating interest to fully understand the total interest on a personal loan.

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