HIRE PURCHASE LOAN Vs FLAT INTEREST LOAN

Recently I have a thought to use my housing loan money to pay for car loan.

One is HIRE PURCHASE loan (FLAT INTEREST) and the other is MORTGAGE loan (REDUCING BALANCE).

What is the different between this two?

When it comes to comparing loans, the stated loan interest rate does not represent everything, and can in fact be deceiving. Aside from loan interest rates, how loan interest is calculated also plays a huge role in your cost of financing.
There are 2 common methods to calculate loan interest in today’s banking system:
  1. Reducing balance method
  2. Flat interest rate method

Reducing Balance Method

This method is mainly used to calculate the interest payable for housing / mortgage / property loans, overdraft (OD) facilities, and credit cards. You only pay interest on the remaining loan balance. A reducing balance interest calculation formula can be represented like this:
Interest Payable per Installment = Interest Rate per Installment * Remaining Loan Amount
The interest rates quoted for such loans are the Effective Interest Rate, which is the same as the interest rates used for Fixed Deposits (FD) and Savings Accounts.

Flat Interest Rate Method

This method is mainly used to calculate the interest payable for personal loans and car / hire purchase loans. You pay interest on the entire loan balance throughout the duration of the loan. Flat interest rate calculation formula can be represented like this:
Interest Payable per Installment = (Original Loan Amount * No. of Years * Interest Rate p.a. ) / Number of Installments
This is less desirable for the borrower, because even as you pay down the loan, the interest payable does not decrease. If you have difficulty understanding why, consider what would happen if savings accounts used flat interest rate method.
If you put RM1,200 at 10% p.a. in a savings account and withdraw RM100 every month, the bank would still be paying you RM10 in interest every month even though your principal balance would have reduced to only RM100 by Month 12. How cool is that?
As a rule, flat interest rates range from 1.7-1.9x more when converted into the Effective Interest Rate equivalent. That is the true measure of your cost of financing.

Conclusion

When considering a loan product, it is always important to know if it is using the Reducing Balance Method of interest calculation or Flat Interest Rate method. And the best way to compare the true cost of the loan is to convert everything into the Effective Interest Rate equivalent. Make use of this Flat to Effective Interest Rate Converter.
- See more at: http://loanstreet.com.my/learning-centre/interest-calculation-reducing-balance-flat-interest#sthash.95sPGxCw.dpuf




13 comments

Good Day !!

I am Hwa Jurong, a Reputable, Legitimate & an accredited money
Lender. I want to use this medium to inform you that i render reliable beneficiary
assistance as I'll be glad to offer you a loan at 2% interest rate to
reliable individuals.

Services Rendered include:

*Home Improvement
*Inventor Loans
*Car Loans
*Debt Consolidation Loan
*Line of Credit
*Second Loan
*Business Loans
*Personal Loans
*International Loans.

Please write back if interested.
Upon Response, you'll be mailed a Loan application form to fill. (No social
security and no credit check, 100% Guaranteed!) I Look forward permitting me to
be of service to you. You can contact me via e-mail: hwa_jurong@yahoo.com.sg or hwajurong12@gmail.com
Yours Sincerely,

Hwa Jurong(MD).

Hello everyone am here to testify how i got my loan from Dr Purva Pius. after i applied several times from various loan lenders who claimed to also testify right in this forum,i thought the testimonies where real and i applied but they never gave me loan. I was in need of an urgent loan to start a business and i applied from various loan lenders who promised to help but they never gave me the loan.Until a friend of mine introduce me to Dr Purva Pius. who promised to help me and indeed he did as he promised without any form of delay.I never thought there are still reliable loan lenders until i met Dr Purva Pius,who are indeed helped with the loan and changed my belief.I don't know if you are in any way in need of a genuine and urgent loan,free feel to contact Dr Purva Pius via his email(urgentloan22@gmail.com) Thank you may God bless you.

I am Mrs.Sandra Bents from Germany, God has bless me with two kids and a loving husband, I promise to share this Testimony because of God favor in my life,2months ago I was in desperate need of money so I thought of having a loan then I ran into wrong hands who claimed to be a loan lender not knowing he was a scam. he collected 2,000USD from me and refuse to email me since. then I was confuse, but God came to my rescue, one faithful day I went to Court after the Case of my friend I share idea with a friend and she introduce me to DR PURVA PIUS LOAN COMPANY, she said she was given 50,000USD by Dr Purva Pius, THE MANAGING DIRECTOR OF DR PURVA PIUS LOAN COMPANY . so I collected his email Address ,he told me the roles and regulation and I followed, then after processing of the Documents, he gave me my loan of 30,000POUNDS .you can contact him on via email : (urgentloan22@gmail.com) I am sure he will help you.

Hello everyone am here to testify how i got my loan from Dr Purva Pius. after i applied several times from various loan lenders who claimed to also testify right in this forum,i thought the testimonies where real and i applied but they never gave me loan. I was in need of an urgent loan to start a business and i applied from various loan lenders who promised to help but they never gave me the loan.Until a friend of mine introduce me to Dr Purva Pius. who promised to help me and indeed he did as he promised without any form of delay.I never thought there are still reliable loan lenders until i met Dr Purva Pius,who are indeed helped with the loan and changed my belief.I don't know if you are in any way in need of a genuine and urgent loan,free feel to contact Dr Purva Pius via his email(urgentloan22@gmail.com) Thank you may God bless you.

I am Hwa Jurong, a Private Money Lender do you need a loan to start up business or to pay your bills and a corporate financial for real estate and any kinds of business financing. I also offer Loans to individuals,Firms and corporate bodies at 2% interest rate. I give out loan to serious minded people that are interested of loan if interested contact this email: hwajurong382@yahoo.com.sg or hwajurong12@gmail.com

Do you need an urgent loan we offer worldwide loan to who in need of loan the business opportunity you having being looking for is here again. email osmanloanserves@gmail.com



LOAN APPLICATION FORM
1) Full Name:
2) Gender:
3) Loan Amount Needed:.
4) Loan Duration:
5) Country:
6) Home Address:
7) Mobile Number:
8)Monthly Income:
9)Occupation:
)Which did you here about us.
Email osmanloanserves@gmail.com

$$$ URGENT LOAN OFFER WITH LOW INTEREST RATE APPLY NOW $$$
Do you need Loan to pay off your debt and start a new life? You have come to the right place were you can get FUNDED at a very low interest rate. Interested people/company should please contact us via email for more details.

Full name:
Date of birth (yyyy-mm-dd):
Gender:
Marital status:
Amount Needed:
Duration:
Address:
City:
State/province:
Zip/postal code:
Country:
Phone number:
Monthly Income:
Occupation:

E-mail: shadiraaliuloancompany1@gmail.com

Do you need a quick long or short term loan with a relatively low interest rate as low as 3%? We offer Xmas loan, business loan, personal loan, home loan, auto loan,student loan, debt consolidation loan e.t.c. no matter your score, If yes contact us via Email: finance2014911@gmail.com Fill The Loan Application Form Below Name............ Amount Needed........ Duration.......... Country............ Monthly income....... Age............. Phone Number........ Sex ................. Email................Business Plan/Use Of Your Loan:....... Apply now on this email :finance2014911@gmail.com Warm Regards Dr Purva Sharegistry


Do you need personal loan? Does your firm,company or industry need financial assistance? Do you need finance to start your business? Do you need finance to expand your business? We give out loan to interested individuals who are seeking loan with good faith. Are you seriously in need of an urgent loan contact us at Email:arabcreditefirm@gmail.com
APPLICATION DETAILS
Your Full Details:
Full Name:
Loan Amount Need:
Loan Duration:
Phone Number:
Applied before?
State:
Monthly Income:
Country:
You are to send this to our Company Email;arabcreditefirm@gmail.com

Hello Everybody,
My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of S$250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of S$250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:(urgentloan22@gmail.com) Thank you.

BORROWERS APPLICATION DETAILS


1. Name Of Applicant in Full:……..
2. Telephone Numbers:……….
3. Address and Location:…….
4. Amount in request………..
5. Repayment Period:………..
6. Purpose Of Loan………….
7. country…………………
8. phone…………………..
9. occupation………………
10.age/sex…………………
11.Monthly Income…………..
12.Email……………..

Regards.
Managements
Email Kindly Contact: urgentloan22@gmail.com

It seems helpful for me i was looking for same kind of content Home Loan Interest Calculation

Hello Everybody,
My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of S$250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of S$250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:(urgentloan22@gmail.com) Thank you.

BORROWERS APPLICATION DETAILS


1. Name Of Applicant in Full:……..
2. Telephone Numbers:……….
3. Address and Location:…….
4. Amount in request………..
5. Repayment Period:………..
6. Purpose Of Loan………….
7. country…………………
8. phone…………………..
9. occupation………………
10.age/sex…………………
11.Monthly Income…………..
12.Email……………..

Regards.
Managements
Email Kindly Contact: urgentloan22@gmail.com

My name is Ahmad Asnul Brunei, I contacted Mr Osman Loan Firm for a business loan amount of $250,000, Then i was told about the step of approving my requested loan amount, after taking the risk again because i was so much desperate of setting up a business to my greatest surprise, the loan amount was credited to my bank account within 24 banking hours without any stress of getting my loan. I was surprise because i was first fall a victim of scam! If you are interested of securing any loan amount & you are located in any country, I'll advise you can contact Mr Osman Loan Firm via email osmanloanserves@gmail.com

LOAN APPLICATION INFORMATION FORM
First name......
Middle name.....
2) Gender:.........
3) Loan Amount Needed:.........
4) Loan Duration:.........
5) Country:.........
6) Home Address:.........
7) Mobile Number:.........
8) Email address..........
9) Monthly Income:.....................
10) Occupation:...........................
11)Which site did you here about us.....................
Thanks and Best Regards.
Derek Email osmanloanserves@gmail.com