Finance

W

WebBoard

Guest
From: Mike .


RRI (Real Rate of Interest)
From: Miss Terious
Date: 18 Dec 2000

Hi All,

Can anyone give me a clear indication as to how to work this formula? Currently I have:

interest rate + annual fees / charges on loan divide by value of loan.

Is this correct?

Thanks in advance!!! And a merry christmas to all!! :)
 
Last edited by a moderator:
Cam

Reply: 1
From: Mike .


Re: RRI (Real Rate of Interest)
From: Cam
Date: 19 Dec 2000
Time: 16:21:02

Hi, The current issue of Your Mortgage Magazine covers this very topic. ie, bank fee's are basically a way of bumping up the interest rate. They have a web site which has an incredible number of calculators. I think a couple of them would be usefull for comparing loans. Have a great day - Cam
 
Last edited by a moderator:
Ric G

Reply: 1.1
From: Mike .


Re: RRI (Real Rate of Interest)
From: Ric G
Date: 19 Dec 2000
Time: 10:22:34

Maybe I'm misunderstanding your question, but the real interest rate is simply the prevailing (or nominal) interest rate adjusted for inflation.

In an approximate sense (economists go a bit futher) all you do is take the inflation rate way from your prevailing "nominal" interest and voila - there's your real interest rate.
 
Last edited by a moderator:
Davin

Reply: 1.1.1
From: Mike .


Re: RRI (Real Rate of Interest)
From: Davin
Date: 19 Dec 2000
Time: 10:38:20

Its been a while since I indulged in Economics but while the point about 'real' figures is correct, i.e. returns minus inflation give real return, there is no such thing as a real interest rate. What would this figure mean.

Yes, the interest rate is the interest rate. The one you pay is the actual interest rate. If you wanted to include other bank costs etc. then they would be included in rate of Return calculations. I'm not to sure about even using a ratio of costs to interest payment, costs tend to be set, so a bigger loan would reduce this amount.

Making the waters more muddier.
 
Last edited by a moderator:
NigelW

Reply: 1.1.1.1
From: Mike .


Re: RRI (Real Rate of Interest)
From: NigelW
Date: 19 Dec 2000
Time: 10:53:08

I think the question Miss Terious might be asking is: how do you determine which loan is actually the cheapest? Ie a loan with the lowest rate but high monthly fees and up front costs may in fact not be the cheapest loan.

I think the term is Actual (or maybe "Adjusted") Annual Percentage Rate or something like that (Bank Johnnies/janey's please help here). I think there are tables of the AAPR's for different loans posted around the place on the web. Try some of the broker sites perhaps?

Bear in mind that cheapest isn't always best. Particularly if you've struck a good bank manager...(still looking myself!)

Cheers N.
 
Last edited by a moderator:
Miss Terious

Reply: 1.1.1.1.1
From: Mike .


Re: RRI (Real Rate of Interest)
From: Miss Terious
Date: 19 Dec 2000
Time: 20:33:20

Thanks for your post Nigel, you're spot on. Thank you also to Cam for your recommendations to http://www.yourmortgage.com.au Still trying to find RRI on the website, but very handy info anyway! That's exactly what I want to know - is to be able to compare one lender who is offering 7.50% on a loan compared to another who is offering 7.00% - hidden costs and fees need to be taken into consideration to find out which one of these is the better deal. Any other comments / suggestions would be appreciated.

ta :)
 
Last edited by a moderator:
Les

Reply: 1.1.1.1.1.1
From: Mike .


Re: RRI (Real Rate of Interest)
From: Les
Date: 19 Dec 2000
Time: 22:34:18

G'day MT,

Go to http://www.ewizard.com.au and follow the bouncing ball to their "Compare Interest Rates" section (I hope it's still there).

They publish AAPR's for around 40 different lenders - it helps show why their rate is so good (had to be, didn't it ;^)

Regards, Les
 
Last edited by a moderator:
Back
Top