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Unsecured loans to high-risk creditors for dubious purposes.

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Q: What type of loan will have the highest interest rate?
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How do you calculate how much interest you will pay for a loan?

The calculation is truly dependent on the type of loan, the compounding period and the duration of the loan. Basic (simple) interest is calculated as follows: I = P * r * t where: I = interest owed P = principal balance (original amount borrowed) r = annual interest rate t = loan duration in years So, say you are borrowing $10,000 for one year at 12% interest. Plugging in the numbers: P = 10,000; r = 12% = 0.12; t = 1 I = 10,000 * 0.12 * 1 = 1,200 So, the simple interest for a year is $1,200. The above steps indicate the process of calculating the interest. But if you wish to decide about the rate of interest you are ready to pay for the loan, it is dependant upon the cash flow that will occur during the same period by which you pay interest. Please remember cash flow is different from profit. However if you pay a major portion of your profit ( income ) towards interest, then it implies that your are working for the lender than for yourself.


What interest applies when interest for each year is based on the amount of the loan or investment?

When each interest calculation uses the initial amount, this is called Simple Interest. The other type is Compound Interest, which uses the current balance as the basis for interest calculation.


What is the difference between a complex and a simple interest?

With simple interest the interest is only charged on the original loan. This is least favourable to lenders - if a payment is missed, only interest on the original loan is added. If extra interest is paid off, or an interest payment is missed, the total interest for a year remains the same. With compound interest, interest is charged on the original loan and [unpaid] interest - each month no repayment is made the interest increases as the interest is effectively added to the loan: lenders like this as they are automatically "re-lending" the unpaid interest. Complex interest is a type of compound interest in that for the duration of the loan repayments are made so that with each payment, the interest accrued so far is paid off and some of the capital is also paid off. The net effect of this is to reduce the loan outstanding each month so that the amount of interest due each month also decreases - if the same amount is paid back each month over the course of the loan the initial payments are mostly interest and the final payments are mostly loan. Examples: £5,000 borrowed for 5 years at 10% APR. Loan to be paid off after 5 years. Simple interest: total interest paid is 5 x £5,000 x 10% = £2,500 Compound interest: (1.1)^5 x £5,000 - £5,000 = £3,052.55 Complex interest: (monthly payment set to clear loan at end of 5 years): Monthly payment = £5,000 x (1.1)^5 x ((1.1)^(1/12) - 1) / ((1.1^5 - 1) ≈ £105.18 → Total interest = £105.18 x 12 x 5 - £5,000 = £1,310.80 (this slightly overpays by about 17p due to rounding) In this case the first payment is £39.87 interest and £65.31 loan, the last payment is 83p interest and £104.18 loan [and 17p excess due to rounding])


How do you calculate total amount of installment?

You need to start with total amount owed, total monthly payments, and annual interest.FORMULA:Payment = (Loan amount x Interest) ÷ (Payments per Year x (1 - (1 + (Interest) ÷ Payments per Year)) raised to the power of negative Payments per Year x Length of Loan)))Or, you could just use Excel and use the PMT function:PMT(interest_rate,number_payments,PV,FV,Type)interest_rate = interest rate for the loannumber_payments = number of payments for the loanPV = present value or principal of the loanFV (optional) = future value or the loan amount outstanding after all payments have been made. If this parameter is omitted, the PMT function assumes a FV value of 0.Type (optional) = when the payments are due. Type can be one of the following values:- 0 = payments due at end of period (default)- 1 = payments due at beginning of period


. The bank earns 10 percent on commercial loans and 12 percent on home loans. What amount of money should be allotted for each type of loan to maximize the interest income?

All of the money into home loans of course.

Related questions

What type of loan have the highest interest rate?

Unsecured loans to high-risk creditors for dubious purposes.


Which type of loan typically has the highest annual percentage rate?

payday loan


Which type of interest rate remains the same throughout the length of the loan?

fixed


Which type of account will typically have the highest interest rate?

savings accounts


What is a reasonable interest rate from a loan company?

A reasonable interest rate varies greatly. It all depends on so many factors. The type of loan you are wanting, the length of repayment terms, your credit score, where you are receiving the loan from, as well as if you are securing the loan with property.


What is a ARM loan?

An ARM loan, known as an adjustable rate mortgage, is a type of loan where the interest rate is fixed for some initial period. After that initial period, the interest rate is variable, typically based on an index (e.g., prime rate, LIBOR, etc.) plus a margin imposed by the lender.


What type of interest is expected on a payday loan?

A payday loan is a very dangerous loan, as it requires an individual to pay an (sometimes) extremely high interest rate. These loans are recommended to be steered clear from.


What is the current interest rate on fedral student loans?

The current interest rate for a DirectPLUS loan is 7.9%. There are no set limits for this type of loan, however you may not borrow more than what is needed for your child's education.


What are the interest rates for an FHA loan?

The interest rates for an FHA loan differ depending on the type of FHA mortgage, such as adjustable rate, fixed rate, energy efficient mortgage, graduated payment mortgage, etc.


What is considered to be a high interest rate on a student loan?

The interest rate on a student loan depends on the year it was established, the type of loan, and the habits of the student paying back the loan. Generally, 6.9% is considered to be in the high range, but lagging behind payments can increase the loan amount up to 14.0+%.


What is the maximum variable interest rate for South Dakota?

It depends on the type of loan and the interest rate specified in the loan. If the rate is specified in the loan agreement then there is no restriction on the rate. Wells Fargo does this in some of their student loans. It says that there is a bottom rate but that there is no ceiling rate except for the ceiling rate required by South Dakota law; When we check to see what South Dakota ceiling rate is... we see that there is no ceiling rate if the rate is specified in the loan agreement. (http://legis.state.sd.us/statutes/DisplayStatute.aspx?Type=Statute&Statute=54-3-1.1).


What kind of interest do small loans have?

There are four main types of small loans. The first type is a payday loan. The interest rates for a payday loan is very high. Usually it is short term so it has a 15-30% interest rate over two weeks. Annually, the interest rate is 390%-700%. You can also get a personal loan from a credit union. The interest is 7%-20%. You can also go to a Pawnbroker for a loan with some personal property as collateral. The interest is 120%-300%. The fourth type of small loan is a credit card loan. This has interest rates from 14%-24%.