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I availed a personal loan of 15000 on mobile banking app with a 16% per annum interest rate and 3 EMIs. As per my calculation, the total repayment should be 15,401. However, the bank has debited 15,878 under the same loan account. There was no processing fee or closure charges. Following is the debited amount details.

  • First Interest Collection - 237
  • First EMI - 5134
  • Second Interest Collection - 133
  • Second EMI - 5134
  • Last Interest Collection - 69
  • Last EMI - 5171

Is this correct and there's something wrong with my understanding of interest rates? Or the bank has blatantly cheated.

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  • What date did the loan start? Does the loan document say how interest is calculated (e.g. same percentage monthly or based on # of days?)
    – D Stanley
    Aug 25, 2021 at 13:18
  • You lent a stranger $15,000 via an app? That seems like an incredibly large amount to lend to a single person this way…
    – quid
    Aug 25, 2021 at 19:20

2 Answers 2

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I availed a personal loan of 15000 on mobile banking app with a 16% per annum interest rate and 3 EMIs. As per my calculation, the total repayment should be 15,401. However, the bank has debited 15,878 under the same loan account. There was no processing fee or closure charges. Following is the debited amount details.

First Interest Collection - 237
First EMI - 5134
Second Interest Collection - 133
Second EMI - 5134
Last Interest Collection - 69
Last EMI - 5171

I used the pmt and ipmt functions in excel I determined the folowing:

Each payment would be 5133.92 which matches your numbers for the first two payments, the discrepancy is $37.

That would total 15401.77 which matches your numbers.

The ipmt formula tells me that the interest for each of your three payments is as follows:

  • 200.00
  • 134.21
  • 67.55

The 2nd one is an exact match and the 3rd is close. The first one is off by $37. That is the second time that that number appeared.

The sum of the interest amounts matches what the pmt function also calculates.

In many (most) of the loan statements I have had they report the total payment, and the amount of that payment that is interest. They sometimes also report the amount of the payment that went to principal.

I think that your lender has broken out the interest portion, so that you know how much of the payment is going to interest. The two discrepancies could be due to a "fee" that is essentially interest with the first payment and then the $37 is captured with the last payment.

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Where

n = number of periods
s = principal
d = periodic payment
r = periodic interest rate

Loan formula derived from the sum of the cash flows discounted to present value being equal to the principal. See Calculating the Present Value of an Ordinary Annuity

loan equation

∴ d = r (1 + 1/((1 + r)^n - 1)) s

With the OP's figures : 16% nominal compounded monthly

s = 15000
n = 3
r = 0.16/12

d = r (1 + 1/((1 + r)^n - 1)) s = 5133.92

Three equal monthly payments of 5134.

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  • Yes, I thought the same amount would be deducted. But they also debited Interest Collection separately three times Aug 25, 2021 at 10:44

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