This is an advertisement for an online app that provides "easy" loans to people.
If you look at the fine print, you will find that the average interest rate is 0.8% per day. Now what does that mean?
To a simple minded person, this interest rate will seem very low but it is a trap. Remember that in the world of finance, interest rates are always annualized. If someone is quoting the interest rate on a monthly or daily basis, the actual interest rate will be much higher than the displayed interest rate.
Without going into too much complexity, common banks currently charge an interest rate of around 25% on annual consumer loans. Since the compounding is on a daily basis, you actually have to pay 28% interest per annum. This means that if you take a loan of Rs 1 lakh, after a year you will be liable to pay Rs 128,000 to the bank.
Consider this "easy" loan scheme in comparison. If the daily interest is calculated separately, then 0.8% for one lakh rupees means 800 rupees per day and the amount in interest alone throughout the year will be 292,000, meaning the amount paid after one year will be 392,000. Interest rate 292%
Even if someone really "lucky" got a loan at 0.3%, the effective interest rate would still be 109%, meaning a return of 209,000 instead of 100,000 a year later.
And compound interest at somewhere around 0.8% daily, then you can't even imagine where the interest will go. The compound interest formula says that this rate will be 1732%. So we set it aside. Although it is not unlikely that interest will be charged on short-term loans at this rate. That is 1732 rupees per annum on one rupee.
So here is a short comparison.
Annual Bank Interest Rate 25%
The Bank's effective rate of interest is 28%
The app has a daily interest rate of 0.8%
The app's effective interest rate is 292%
Be careful. Don't fall into the trap of these "easy" loans.
(Hashir Ibn Irshad)
یہ ایک آن لائن ایپ کا اشتہار ہے جو لوگوں کو "آسان" قرضے فر
