The renovation loan interest rate is 0.26%. What is the actual annualized rate?
The common decoration loan is by credit card installment, that is, after the application is successful, a decoration installment credit card will be automatically issued, and it will be automatically installment next month after each swipe.
Let's take a look at how the real interest rate of decoration loans is calculated.
At first glance, the monthly interest rate is 0.26%, so the annual interest rate is 12*0.26%=3. 12%. However, is this really the case?
First of all, let's talk about the difference between rates and interest rates:
Rate: always charge according to the total principal, the principal owed is reduced, and the interest is unchanged, that is, the expenses incurred in each period are the same.
Scenario: It is generally used for bank large installment loans and credit card installment.
Interest rate: interest is calculated according to the remaining principal, and the interest decreases with the decrease of the principal owed, that is, the interest repaid in each period is different.
Scenario: generally used for mortgage, mortgage loan.
How to convert the rate into interest rate?
Let me give you an example: 20W renovation loan with monthly interest of 0.26% and 60 installments. The principal of each installment is 3,333.33 yuan (rounded up), and the monthly interest is 520 yuan.
The rate is converted into annualized interest rate and converted by IRR formula. Input these data into excel and use IRR function to calculate, as shown in the following figure:
As can be seen from the above table, the monthly interest rate of the 20W decoration loan is 0.26%, and the real interest rate of the 60th installment (five years) is 5.858%. It can also be seen that the sooner the loan is paid off, the lower the interest rate will be. This time, the real interest rate of the decoration loan is clear. Compared with the annualized interest rates of car loans and credit cards, decoration loans are very cost-effective, even lower than the mortgage interest rate in the short term.
Suggestion: The sooner the renovation loan is repaid, the lower the annualized interest rate. If there are indeed small partners who need to decorate, and there is a temporary shortage of funds, the monthly supply pressure will not be great, so you can consider making a decoration loan.
Where can I get a reliable decoration loan?
Now the four major banks have launched renovation loans. Rough houses and hardcover new houses, newly bought second-hand houses can apply for low-interest decoration loans. I will match the best bank according to your credit qualification.