Annual interest refers to a way in which the borrower calculates all the interest during the repayment period and accumulates it to one year later. According to the agreement, the borrower is required to repay the loan in the form of equal monthly principal and interest. The essence of this method is to facilitate the lender's statistics and accounting, so as to facilitate the evaluation of the financial situation.

The advantage of annual interest calculation is that the repayment method is relatively simplified, which is convenient for lenders to calculate and count the total interest of the year. At the same time, this method can ensure the accuracy of interest calculation no matter when the borrower repays in advance. However, the annual interest accrual of wealth management products reduces the flexibility of lenders to a certain extent, and lenders can only repay before the repayment deadline.

Annual interest calculation usually applies to long-term loans or wealth management products. This way can facilitate lending institutions to ensure accurate accounting during the year, so as to grasp the changes in annual profits. For short-term loans or small loans, it is recommended to use the daily interest rate calculation method, which is more flexible and accurate. In a word, annual interest calculation is an effective loan method, which can bring clearer fund management and liquidity control to borrowers and lending institutions.