### 3 Types of Credit Interest You Need to Know

Have you ever calculated how much influence interest rates have on your loan? If you multiply the interest rate by the total loan, it seems that the interest charged is quite small, but you need to understand the type of interest you are charged with and the real calculation to find out how much interest you will have to pay.

Through the following article, Ursula Brangwen will invite you to see a credit simulation and get to know the 3 types of credit interest you need to know.

### Flat Flowers

It is the type of interest rate that is considered the simplest and easiest calculation compared to 2 other types of credit interest. Generally, this type of interest rate is used on Unsecured Loans (KTA) and Motor Vehicle Loans (KKB).

You can see an example when you receive a motorbike or car loan brochure, where there is a table containing the installments to be paid each month. If you find a credit offer with a fixed calculation column like that, then there is a high indication that the type of interest used is a flat interest rate.

On flat rate loans, the calculation of the loan ceiling value and interest will be calculated proportionally according to the tenor or the length of the loan.

The calculation formula used in flat interest rates is as follows:

Interest per month = (P xixt) / jb

Information:

- P = loan principal
- i = interest rate per year
- t = number of years of credit period
- jb = number of months in the credit period

### Effective Interest

Effective interest or often called the sliding rate is usually the interest rate used for long-term credit or in other words the tenor is long. The calculation system used in effective interest rates is the installment calculation based on the remaining principal debt. Thus, the calculation of the proportion of interest and principal debt in each period will always change even though the monthly installments are the same.

Examples of the use of effective interest rates are in Home Ownership Loans (KPR) or Apartment Ownership Loans (KPA) or other investment loans. Effective interest rates prove to be lower than flat interest, especially if applied to a type of long-term credit that does not need to be repaid in a hurry.

Why can the interest be lower? This happens due to the calculation of effective interest rates where interest is calculated from the remaining principal debt, while flat interest is calculated from the initial loan. Therefore, the longer the interest rate will be smaller because your loan will decrease.

The calculation formula used in effective interest rates is as follows:

Bunga = SP xix (30/360)

Information:

- SP = the loan principal balance of the previous month
- i = interest rate per year
- 30 = number of days a month
- 360 = number of days in a year

### Annuity Interest

Annuity interest is a modification or development of an effective interest rate that is intended to facilitate customers in paying the installment amount for each period because the amount is always the same. If in the calculation of the effective interest the principal installment is obtained from the division between the amount of the loan and the tenor of the credit, the application of the annuity interest allows the principal installments to be calculated from the total installments that have been determined minus the annuity interest calculation results.

In short, the annuity interest makes the installment amount each month the same, where only the composition of interest and principal installments are constantly changing, the installments of the principal or principal of the debt per month will increase but at the same time the interest rate will decrease.

The calculation formula used in annuity interest rates is similar to the effective interest rate calculation formula, namely as follows:

Information:

- P = loan principal
- i = interest rate per year
- 12 = number of months a year