GET TO KNOW TYPES OF BANK INTEREST RATES
As a bank customer, of course you know what interest rates are. But don’t get me wrong friends, there are still many people who may not be familiar with bank interest rates. Before getting to know more about products and facilities in banking, it’s a good idea for you to know in advance what bank interest rates are.
In simple terms, bank interest rates are summed up as remuneration provided by banks to customers who buy or sell their products. Interest can be calculated as the price that must be paid by the bank to the customer (who has deposits) and the price that must be paid by the customer to the bank (if the customer gets the loan facility). Bank interest can be divided into two types, namely deposit interest and loan interest. Deposit interest is remuneration from the bank to the customer for the customer’s service of saving money at the bank. Meanwhile, debt interest is the remuneration set by the bank to the borrower for the debt he gets. ashleyvillage.org
Within the banking industry, there are 5 (five) interest rate styles, namely:
1. Fixed interest rate
Fixed or fixed interest rates are interest rates that are fixed and do not change until the temporary term or until the maturity date (during the temporary credit period).
An example is KPR interest for low-cost housing or subsidized housing that applies a fixed interest rate. In addition, fixed interest rates can also be used in motor vehicle loans as well.
2. Floating interest rates
Floating interest rates are interest rates that change according to market interest rates. If interest rates in the market rise, then the interest rate also increases, and vice versa.
An example is the mortgage interest rate for a certain period. For example for two th. first applied fixed interest rates, but the period after that take advantage of floating interest rates.
3. Flat interest rates
A flat interest rate is an interest rate whose calculation refers to the principal amount owed at the beginning for each installment period. The calculation is very simple compared to other interest rates, so it is usually used for short-term loans for consumer goods such as mobile phones, household appliances, motorcycles or unsecured loans (KTA). The calculation formula is: For example, the Bank adds credit with a 10-month temporary term of Rp. 15,000,000.00 with an interest of 10% per year. (flat). The assumption is that the credit interest rate does not change (fixed) during the credit temporary period.
4. Effective interest rate
The effective interest rate is the interest rate that is calculated from the remaining principal amount of debt each month as the debt that has been paid has decreased. This means that the less principal the loan is, the less calculated the interest rate that must be paid. The effective interest rate is considered fairer for customers compared to using flat interest rates. The reason is that flat interest rates are only based on the initial amount of the principal debt. Interest calculation formula:
5. Annuity rates
This method adjusts the amount of principal installments plus interest installments paid so that they are the same every month. In the annuity calculation, the portion of interest at the beginning is very large, while the portion of the principal installment is very small. Approaching the end of the credit era, conditions will reverse. the principal installment portion will be very large while the interest portion will be smaller.