when applying for a loan from the bank You will be offered various credit products. with different characteristics Either product details or different payment methods and interest calculations. There are at least 4 methods of paying bank interest rates: fixed rate real rate, floating interest rate and Annuity.
In this article, the author will discuss the fixed rates while discussing more or less the differences between the above two types. Therefore, it is hoped that you, as a bank customer, can choose the best loan products.
Definition of Fixed Rate
Fixed rate is the application of interest payments at a fixed rate and refers to the initial principal amount of the loan. For example, you borrow Rp. 12,000,000 from a bank at an interest rate of 6% p.a. Therefore, you must pay Rp. 1,000,000 + (6) %/12) also known as Rp. 1,000,000 + 0.5%
This means that the amount of interest you owe will remain regardless of how much your loan principal decreases over time. This interest payment mechanism generally applies to short-term loans. Unsecured loans (KTA) or other types of credit products Another name for fixed rates is fixed interest rates.
An example of a credit simulation with a fixed rate system
The formula for calculating monthly interest rates using this system is
fixed fixed rate per month = (P x I) : Jb
p : Initial loan principal.
I : Interest rate per year.
JB : Loan period in months.
For example, credit in the subchapter above. Suppose you take a loan of Rp. 12,000,000 from a bank with a repayment period of 1 year (12 months), then the bank will approve your loan and offer you a fixed interest rate of 6% per annum, so the amount of interest you have to pay each month. is:
Fixed fixed rate per month = (12,000,000 x 6%) : 12
= 720,000 : 12
You will still pay this amount even if you make an installment of IDR 1,000,000 or IDR 100,000 per month.
fixed profit margin
1. Easy to calculate, save and remember.
with a fixed interest rate You can easily remember the amount of interest you have to pay each month, so you can also record the amount you need to spend to pay off your debt to the bank in a timely manner.
Of course, this will be different if you also use credit products. floating interest rate. With floating system You need to be aware of the amount of interest you have to pay each month. because the amount is always changing
2. Suitable for people with regular income
Fixed rate loans are easy to remember, calculate and save if you have a fixed income every month. Whether from being a government official or an employee Especially now that banks also allow payment mechanisms using direct debit. This means that the loan is automatically deducted from your remaining savings every month. That way, you don’t have to come to the bank every month to pay your installments.
for deposit investorsThe existence of fixed interest rates indicates a low risk investment. Because it means that they get a small profit that remains regardless of the prevailing market conditions.
Disadvantages of Fixed Rate
borrow money outside the system fixed rate It would be expensive to have a standard interest rate cut which is supposed to lower the bank interest rate. For example, you take a fixed rate loan with a 6% ratio when BI7DRR is still 4.5%.
It turns out that before you pay off your debt, BI7DRR drops to 3%, which results in your loan interest rate dropping to 4.5%. As a result, you will pay a higher interest rate. Conversely, if the BI7DRR increases, the small amount of interest you pay will also feel cheaper.
2. Do not adjust the outstanding loan balance.
Note that the flat rate ratio is calculated on the total initial loan principal. This means that no matter how many installments you pay, The small interest will remain the same. This is different from choosing a loan product with effective rate.
Nominal interest rate for loan products effective rate will be adjusted equal to the remaining principal of the loan This allows you to pay lower interest rates by paying off the debt with a larger amount.
Difference Between Fixed Rate Real rate and annuity
fixed rate different from effective rate or the real interest rate and floating interest rate or floating interest rates at real rate The percentage of interest you pay can be fixed. But the real rate refers to the remaining principal of the loan. Therefore, the amount of interest you pay also decreases as the remaining principal of the loan decreases.
part floating interest rate It is a bank interest rate that varies according to the reference rate set by BI, regardless of the principal amount of your loan or the remainder of your loan with the bank. So the interest and installments you have to pay are different every month.
A fixed rate is also different from an annuity. In other words, if the rate is slightly fixed and the ratio of interest paid is fixed to the annuity, the total number of installments per month will be constant. While total interest may vary based on changes in the remaining principal of the loan.
You need to be aware of the difference in this interest payment system. This is because it is not uncommon for banks to use a hybrid system, i.e. interest on a loan is fixed for one year and then floats. This is especially true for long-term loans such as mortgages.
So how do you choose a good credit product? First, in addition to considering needs and ability to pay. You must first calculate the nominal interest rate you have to pay the bank. to help solve this problem Details of interest payments can be obtained from the customer service of the relevant bank.
Secondly, pay attention to the potential of the country’s economy. Is there a possibility that the economy will increase as long as you repay your loan or decrease? Rising macroeconomic conditions are often followed by rising interest rates. and vice versa