Finance – Rate of Interest? Explained in a much simple way!

Well!! This is a terminology we have been studying since our school days. But, still at times we do face problems when this term comes into picture while taking any type of finance. Such as Personal Loan, Home Loan, Car Loan, etc.

Getting into the definition part of it.

As defined in Investopedia:

Interst Rate

Its for sure, once we have read the above definition we have a fair idea what it means.

Now, just to put the above definition in a simpler term.

Simplified Definition:

Depending on the money being taken from a bank or a finance company as a loan (be it personal loan, home loan, car loan, education loan,etc.). Rate of Interest will be charged for the total amount borrowed. 

Let me explain it with a scenario:

Let us consider that I have taken a personal loan of say Rs 10,000/- for an example from any bank or a finance company.

And the said Rate of Interest being charged is of 11.15%. annually. Say, the loan tenure is said to be 2 years.

Note: Rate of Interest is generally calculated on a yearly basis. There are two types of interest that is calculated.

  • Simple Interest
  • Compound Interest

In the above said scenario for the loan amount Rs 10,000/-

If we say it to be a simple rate of interest that will be calculated. Then, total interest being paid at the end of 2 years would be Rs 2230/-

If we say it to be a compound interest that will be calculated. Then, total interest paid at the end of 2 years would be Rs 2354.32/-

The difference of Interest amount is seen because in simple interest the interest is being calculated only on the principal amount, your interest amount of first year is not added here to calculate the interest for the 2nd year. But, in case of compound interest it is being calculated not only on the principal amount but it is calculated on (principal amount + interest amount of first year).

Formula used to calculate Simple Rate of Interest and Compound Rate of Interest is:

(Source of formula: Investopedia)

Simple Rate of Interest = P (Principal) x I (Annual Rate of Interest) x N (Years)

Compound Rate of Interest = P (Principal) x [ ( 1 + I(Rate of Interest) N (Months) ) – 1 ]


DISCLAIMER: This article is only meant for general education purpose. 

Processing and Foreclosure Charges? Explained in a much simple way!

Yes, Everyone has at least a little confusion with respect to these terminologies.

So what you think would be the meaning of these terms??


How stupid is to ask such a question? If you would have a better understanding of it. Isn’t it obvious? that you wouldn’t have been here to read this post at all??

No Problem! By the end of this post I am sure you will be able to figure out what this terms exactly mean.


process and forecluser

Processing Charges: These are the charges applied by a bank or any finance companies to process your loan application and provide you the loan amount based on your eligibility criteria and terms and conditions of the provider bank or any financial company.

Basically, it is the charges applied to the customer by any financial organization to meet the costs they come across to give a better efficient service to the customer.


Before, applying for any loan. Make sure you check for these charges properly. So that you are saved from paying heavy processing charges for the loan amount.

Because there are banks or finance companies which charge almost Nil or negligible charges to their customer.

Foreclosure Charges: These are charges applied by the bank or any finance companies to process the closure of your loan in advance.

For Example:

Say by Grace of God! you could save huge money in shorter duration of time and you are now willing to pay all the remaining EMIs in advance. Then, you can do so by applying for foreclosure of the loan.


A gentle reminder, would be of no harm!

Please ensure before applying for any loans to avoid yourself from paying heavy foreclosure charges.

Because, there are banks or finance companies which charge almost Nil or negligible charges towards foreclosure of the loan.

Conclusion: No matter how careful you are in terms of loans and finance. Don’t ever be negligible with respect to these charges.

Because these charges might be negligible if the loan amount is small.


Same charges might be huge enough if the loan amount is large.

Hope so this post was of some help for you!

Keep reading my blog! Do let me know through your comments, if you have any specific questions with respect to the above post!

EMI? Explained in a much simple way!

EMI?? What is this EMI all about? This term is really confusing, I being from a non finance background. I find it hard to understand this terminology all together!!

If you also think so!

Then this post is definitely for you!

Don’t worry!

EMI to understand is quiet simple. To first tell the full form of it. It goes this way.


EMI = Equated Monthly Installments

Now, you might think what is the definition of it? No problem. Definition is like this. In very simple language.

Definition: To have better understanding of this you must be having at least some idea of Finance and its parts.

If you want to have a clear understanding of it in just 3 to 4 minutes. I would recommend you to read this post of mine.

What is Finance? Want to know it in a much simpler way?

Okay, here is the best part about EMI. And, this is why it is very popular driving force to take any loans these days.

From what you read in the Finance post above. Part 2 of Finance can be easily done through EMI.

You can easily return the amount you received from the bank or any finance company in Easy Equated Monthly Installments.

When I say, Easy Equated Monthly Installments. It has 3 components to it.

First: Principal Amount

Second: Interest Amount

Third: Service Tax or any other applicable taxes

So having known in general about What EMI is all about? Lets also know, as of now there are banks or financial institutions providing this option of EMI in 2 different ways!

  1. EMI with interest
  2. EMI without Interest

1. EMI with Interest: There is considerable rate of interest being charged for the loan amount received based on the loan tenure.

2. EMI without Interest: There is absolutely no interest being charged for the loan amount received.

Note: Either with respect to EMI with/without interest. Please don’t forget to look for all the processing and foreclosure charges for the loan being applied for.

Want to know more about Processing and Foreclosure Charges?

Bet you would want to read this post of mine which will give you a fair understanding of these terminologies in not more than 4 to 5 minutes.

Processing and Foreclosure Charges? Explained in a much simple way!

Conclusion: No matter which loan your planning to opt or apply for. Be sure to check all the features of the loan appropriately.

So that you don’t end up with a wrong loan and save as much as money on interest payable and make yourself relaxed by choosing one of the best EMI facilities.

Hope so this was of some help for you!

Thanks for reading! Do comment your thoughts on the above post. 🙂