A client received a JOD 800 loan for the third time from Tamweelcom, with a tenor of 12 months at a declining intrest rate/annual of 31.686% and which is equivalent to fixed interest rate/annual of 18%.
1. What is the total interest rate paid for the loan?
Total interest rate for the loan = 144 JOD
Stamps duty on the Contract = 2 JOD
One-time commission for credit granting = 8 JOD
Other services: “Sanad” insurance service upon customer request, subject to the company’s terms and conditions = 2.5 dinars per month
2. What is the monthly payment for the loan (principal, interest and sales tax on interest)?
First month payment amount: 81.820 JOD
The remaining monthly payments amount: 81.500 JOD (Including principal payment, interest and sales tax on interest).
3. How to calculate the effective interest rate (EIR) for the loan
The effective interest rate (EIR) = (1+IRR)12 - 1
The Internal rate of return (IRR) calculated using Microsoft Excel by using the equation of IRR:
Value field: enter all the cash flows (plus and minus)
Guess field: (represents the expected income): enter 0
IRR = 0.03508
Which represent the Monthly Effective rate
The effective interest rate (EIR) calculated by substitute the IRR in the following equation:
The effective interest rate (EIR) = (1+IRR)12 - 1
The effective interest rate (EIR) = 51.247%