At the bank or financial institute how are the interest calculation is different from loans and savings? Are they calculated the same way?

  • Can you be more specific? It's not clear what "interest rate calculation" you are referring to. – D Stanley Apr 28 '18 at 2:52
  • Hi thanks, calculation of Interest Rate is happening in same way both saving and loan? – Praneeth Jayarathna Apr 28 '18 at 3:08
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    I still don't know what you mean. Interest rate is given for a loan or savings account. It is not calculated. Do you mean how the interest earned or charged is calculated? Or how banks determine what interest rate to charge on a loan? – D Stanley Apr 28 '18 at 3:10
  • thanks, yes I need to know , how differ from interest earned calculation saving and loan – Praneeth Jayarathna Apr 28 '18 at 3:47
  • The definition will be in the terms and conditions for the loan or savings account. It may be the same for products from the same bank or it may be different. – Robert Longson Apr 28 '18 at 21:02

Within some parameters, interest is calculated the same way on both loans and savings. Some parameters that can differ:

  • Interest rates.
  • Compounding period.
  • Treatment of advanced payments for the loan.

As a general rule, you can deposit to a savings account at any time (sometimes with a limited number of transactions per month). Some loans may operate the same way. As soon as the payment is credited, it is applied. With other loans, they apply the payment on a schedule. All payments in a particular month period may be applied on a particular day. Or advance payments may still be applied exactly when expected. You can pay early but it doesn't save interest. This treatment depends on the loan contract.

The interest rates and compounding periods also depend on the loan or savings contract.

TL;DR: the calculation could be the same but is often different, particularly in how they handle deposits. The behavior should be set in the loan contract or the terms of the savings account.

Or, more briefly, you should ask your bank.

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