₦airaland Forum

Can any banker explain loan amortization to me?

A bank offers you a facility at 21% interest. You check what you will be repaying using loan amortization calculator, it gives 35% interest on the principal. Is their any alternative to loan amortization? Is it operational in Nigeria?

What is loan amortization?

lalasticlala, Ishilove, I need some professional insight. Google did not explain much

Bankers in the house
Can you through some light?

adedayor08:
A = payment Amount per period
P = initial Principal (loan amount)
r = interest rate per period
n = total number of payments or periods

Thanks

I have got some other questions in my post. Can you attempt them?

adedayor08:
what are the questions ? share it with me

Thnaks

1. Is that the only method loan repayment in Nigeria?
2. Are there other options?
3. Why should a bank say 21% when in actual sense, it is 35%?

adedayor08:
1 amortization is just a simplification of rather tedious explanation of loan so other methods should yield same result ( all things beeing equal)
2. methods such as simple interest wont work cos are paying installmentally and their is re-investment assuption attached.
3 . u will pay 25 percent on capital owed so, the total amount paid as interest will vary depending on duration, if u choose a shorter pay back period, ur total interest paid may be less than actual 25 percent

So there is a mandatory 25% on the principal? You are making more sense. So that whatever the rate offered, it can't be less than 25% in simple interest terms (permit me to to use that).

makes sense. I was demanding such explanation today from a marketer and she was trying to blackmail me with I am learned and I should not go into such argument bla bla. Not totatally OK but I can sleep with this.