Namaste everyone,

Recently, I was looking to obtain a loan for some reason. However, I am very confused with the interest calculation methods and how the whole process is done. For example, I borrow a sum of 1,000,000 for a time period of 2 months at an interest rate of 8.5% pa. How will the interest be calculated? I heard that its calculated by taking the daily balance or something.

If someone knows this, please comment and help!

Thank you.

More at: r/NepalStock by khetanharsh

  1. AFAIK

    Loans having maturity of its given time period calculates its interest rates by two things.
    **Interest rates = Base rates + additional bank rates**.
    Base rates are published by NRB’s, maybe monthly or quarterly. And the bank one’s keeps changing to adjust your additional bank driven interest rates to keep liquidity stable which can change your monthly or quarterly based interest rates unitil you get fixed interest rates loans which usually are higher and has 2-3 years of maturity compared to variable interest rates loans.

    And talking about calculation by taking the daily balance is mostly used in savings account. It takes the day’s closing amount and gives interest according to it.

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