In most of the Indian banks the interest is calculated on a daily reducing balance? This will help you to save more. Still some banks use an annual reducing balance method, this is benefit only the bank and not for the individual.
In the case of the daily reducing balance, which is the methodology we employ, your interest is calculated only on the outstanding loan amount, which reduces every time you pay off your EMIs or make any prepayments. This in essence lowers your effective rate of interest significantly.
On an annual reducing balance method, you will continue to pay interest on amounts you repay during the coming one year as the interest for the year is determined on the basis of the balance outstanding at the beginning of the year.
These all things you must clarify before getting a loan, otherwise you may have the chance to loose your money by paying more interest to bank.
In the case of the daily reducing balance, which is the methodology we employ, your interest is calculated only on the outstanding loan amount, which reduces every time you pay off your EMIs or make any prepayments. This in essence lowers your effective rate of interest significantly.
On an annual reducing balance method, you will continue to pay interest on amounts you repay during the coming one year as the interest for the year is determined on the basis of the balance outstanding at the beginning of the year.
These all things you must clarify before getting a loan, otherwise you may have the chance to loose your money by paying more interest to bank.