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Because, charging interest is one of the main sources of income for banks. Since you are borrowing money from the bank, it is the banks right to charge you an interest for lending you that money. Since they are giving you the money for your use, you are bound to pay them an interest for getting money from them.

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Q: Why do bank still charges interest on loan?
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How much interest does a bank charge when borrowing money?

The amount of interest that a bank charges when you take a loan from them varies greatly. Every bank is different, and even in a specific bank rates can be different. A personal loan to a car loan will have different rates. Your best bet is to call your local bank and ask them the rate for the specific loan you need.


Is the amount charged for use of bank's money is called interest?

Yes. The amount a bank charges you for using their money is called an interest. This facility wherein you get to use the banks money and repay them is called a Loan. The bank grants you a fixed amount as loan and you repay them every month along with an interest.


Difference between interest rate and finance charge?

finance charge - This is the one time fees that the bank may charge for processing your loan Interest rate - This is the rate at which you must pay the bank interest for availing the loan during the loan tenure. Ex: Assuming you take a Rs. 1 lakh loan for 1 year at 10% fixed rate of interest and a 0.5% processing fee/finance charges ==> Monthly payment = 9166.67/- (Out of this Rs. 8333.33 would be principal repayment & Rs. 833.33 would be interest) Finance charges = Rs. 500/-


Is bank loan an asset?

A bank loan is an asset for the bank as bank receives interest and principle payments from borrower.


Are you still covered by gap insurance if my loan is in default?

In many cases you would still be covered, but not usually for the amount by which your loan is in default and not for any additional charges and interest applicable to that default amount.

Related questions

If the federal sells a treasury bond to a bank what will be the effect on the interest rate the bank charges its customers for a loan?

The interest rate will increase since there are fewer available funds for the bank to loan.


If the federal reserve buys a treasury bond from a bank what will be the effect on interest rate the bank charges its customers for a loan?

The interest rates will decrease since there are more available funds for the bank to loan.


What will be the effect on the interest rate the bank charges its customers for a loan if the bank buys a Treasury Bond from the Federal Reserve?

The interest rate will increase since there are fewer available funds for the bank to loan.


If the Federal Reserve sells a Treasury bond to a bank what will be the effect on the interest rate the bank charges its customers for a loan?

The interest rate will increase since there are fewer available


How much interest does a bank charge when borrowing money?

The amount of interest that a bank charges when you take a loan from them varies greatly. Every bank is different, and even in a specific bank rates can be different. A personal loan to a car loan will have different rates. Your best bet is to call your local bank and ask them the rate for the specific loan you need.


Is the amount charged for use of bank's money is called interest?

Yes. The amount a bank charges you for using their money is called an interest. This facility wherein you get to use the banks money and repay them is called a Loan. The bank grants you a fixed amount as loan and you repay them every month along with an interest.


How do you pass journal entry if company take t he loan from bank includes interest?

debit bank accountcredit loan from bankwhen interest incurreddebit interest on loancredit loan from bank


What is the definition of interest rates?

An interest rate is the amount of money a bank can charge on the loan that they provide you. That is how they make their profit. If they didn't charge an interest rate and just loaned out money, then there's no way they can make money off of the loan.


Difference between interest rate and finance charge?

finance charge - This is the one time fees that the bank may charge for processing your loan Interest rate - This is the rate at which you must pay the bank interest for availing the loan during the loan tenure. Ex: Assuming you take a Rs. 1 lakh loan for 1 year at 10% fixed rate of interest and a 0.5% processing fee/finance charges ==> Monthly payment = 9166.67/- (Out of this Rs. 8333.33 would be principal repayment & Rs. 833.33 would be interest) Finance charges = Rs. 500/-


Is bank loan an asset?

A bank loan is an asset for the bank as bank receives interest and principle payments from borrower.


What if there is still a bank loan on the property you are trying to file an adverse possession on.?

The bank has a prior interest and you would have to pay it if your claim is successful.


Are you still covered by gap insurance if my loan is in default?

In many cases you would still be covered, but not usually for the amount by which your loan is in default and not for any additional charges and interest applicable to that default amount.