For example, the bill is divided into 12 installments, and the rate of each installment is 0.5%. If we directly divide by 0.5%× 12, we can get the conclusion that the annual interest rate is 6%. For example, we divide the bill into 1000 installments, and the principal of each installment is 1000 yuan plus 60 yuan handling fee, but the problem is that the money owed to the bank is getting less and less, and the handling fee is still fixed. Only owed to the bank 1000, the interest rate is still 60, and the annualized interest rate is 72%.
Therefore, if you charge monthly like this, you can simply apply the simplified formula above to get an approximate actual annual interest rate with an error of 1%. For example, the monthly interest rate is 0.5%, the nominal annual interest rate is 6%, and the actual annual interest rate is about 1 1%.
Extended data:
Installment consumption 10000 yuan, paid in 12 months, and the principal is about 833 yuan per month (excluding the handling fee). That is to say, you spent 10000 yuan for 12 months, only the last payment of 833 Yuan You was used for 12 months, and the first payment of 833 Yuan You was only used for one month. Money has time value;
/kloc-833 yuan after 0/2 months is definitely different from the current 833 yuan. For example, this 833 yuan can still generate income by putting it in the money fund or the deposit bank.
Internal rate of return (IRR) is a proper term, which means that the total present value of capital inflow is equal to the total present value of capital flow and the net present value is equal to the discount rate of zero.
Specifically, you can use EXCEL or financial professional calculator to input the monthly repayment amount and total loan amount and calculate the real interest rate. Take Mr. Wang mentioned above as an example. His consumption is 10000 yuan, which is repaid in 12 installments, with 0.6% in each installment. The calculated actual annual interest rate is about 13%, far exceeding 7.2%.