Monday, August 10, 2020

Effective Annual Interest Rate Calculations

Our beloved Addict951 had a question on how Citibank calculated the 9.78% EIR published on their website.

https://www.citibank.com.sg/loans/paylite/index.htm

$250 loan with upfront 2% service fee with 6 equal instalment payables.

On face value the EIR appears to be way lesser. However, it is way MORE! In fact, Citibank is correct to publish the EIR figure at 9.78%.

This is because this is a loan (like a car loan) where interest is being charged based on the ORIGINAL PRINCIPAL (what a crappy method right?).


1 comment:

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