EIR vs NIR

[9N1Y9N1Y]

Effective Interest Rate vs Nominal Interest Rate


Any one can advice what is this EIR and NIR thing when it comes to personal loan interest

 

[dork32]

Effective Interest Rate vs Nominal Interest Rate


Any one can advice what is this EIR and NIR thing when it comes to personal loan interest

in primary school term nir is simple interest. eir is compound interest.

 

[rotiboyz]

no banks use NIR

 

[hwmook]

no banks use NIR

Not true, car loans are simple interest rate so the effective interest rate is double.

 

[ladypatricia]

nir refers to interest that excludes all charges, fees, etc. eir is the actual interest u pay after all hidden charges. hence lookout for lower eir to have max gain

 

[beri stupid idiot]

nowadays BT or FT have processing fee plus interest (together called EIR is it ?)

 

[9N1Y9N1Y]

thanks all for the reply so to look at actual value I should refer to EIR right

 

[dork32]

it works this way

lets say i take a loan of 10 000 at nominal interest of 20% per year and i would like to pay it in 12 monthly installment. total interest + principal = 12k so pay 1k per month.

But effective interest is much higher at 35%. becoz when you pay your installments every month, the amount owed is lowered. but interest is still charged on the original principal of 10k.

i noticed banks like to use nominal interest rates to lure gullible people into taking loans, thinking that it is very cheap

 

[wts2013]

read this before u decide:

Things to Watch Out for - MoneySENSE

 

[hwmook]

it works this way

lets say i take a loan of 10 000 at nominal interest of 20% per year and i would like to pay it in 12 monthly installment. total interest + principal = 12k so pay 1k per month.

But effective interest is much higher at 35%. becoz when you pay your installments every month, the amount owed is lowered. but interest is still charged on the original principal of 10k.

i noticed banks like to use nominal interest rates to lure gullible people into taking loans, thinking that it is very cheap

Correct, alway look for EIR to determine when you should take the loans. Car loans are such loans that always state NIR.

 

[SoulEraser]

In short when eir is based on reducing balance

 

[9N1Y9N1Y]

so if e.g. I'm comparing personal loan with banks I should compare EIR?

E.g. POSB EIR is 12.09% vs HSBC EIR 13.53% for 5 years?

so assuming I loan 10K it would be 10K x 12.09% x 5 years?

Loan Assist - Fast Personal Loan, Instalment Loan, Personal Loan Rates in Singapore | POSB Bank Singapore
https://www.sc.com/in/borrow/personal-loans.html

 

[dork32]

so if e.g. I'm comparing personal loan with banks I should compare EIR?

E.g. POSB EIR is 12.09% vs HSBC EIR 13.53% for 5 years?

so assuming I loan 10K it would be 10K x 12.09% x 5 years?

Loan Assist - Fast Personal Loan, Instalment Loan, Personal Loan Rates in Singapore | POSB Bank Singapore
https://www.sc.com/in/borrow/personal-loans.html

eir to eir comparison understood choose the one with lower interest.

i think the illustration by posb is quite good. you pay $214/ month * 12 mth/yr * 5 yr = 12840. so you pay 2840 interest.
$2840/$10000 / 5year = 5.68% /yr(Nominal interest rate)

To find the EIR, type
=rate(60,214,-9600,0)*12 = 12.09%

 

[dork32]

12.09% is very high rate. You may want to find other ways of borrowing the money.

 

[Polar Bear King]

12.09% is very high rate. You may want to find other ways of borrowing the money.

Super high ar! Is this a business loan?
Can try 6 mth fund transfer can get better rates.

 

[9N1Y9N1Y]

looking for personal loan to clear existing credit card. is there other alternatives?