Interest payments are those payments which are given on the taken money. Taken  money is used for specific period. So, it is the duty of borrower to pay interest on taken money. Interest may be calculated and paid on daily basis, weekly basis, monthly basis, half- yearly, yearly basis and whole the period. But half yearly and yearly basis interest payments are common on bank deposits. Interest payments are calculated on the basis of principal amount. Interest may be simple or compound as per the terms of agreement. In compound interest, interest is calculated on the principal plus previous all interest. Interest will be included in the installment, if you buy any asset on installment basis.

Interest on Late payment

If you are repaying your loan in installment. Interest will be included in it. Sometime, you may delay to pay the installment. At that time, you have to pay interest for total delayed period. For example, you pay monthly installment after 3 months. It means, you have to pay interest of three months with your installment. Let me explain with a simple example:

Suppose, you have taken 10000 loan and you are paying 1000 monthly installment with 10% interest. It means, you repay the principle 916 + 83.33 ( interest). Suppose, next installment, you have paid after three months. It means, your balanced principal after first installment is 9084. Interest of 10% on it is 908.40. One month interest 908.40/12 = 75.70. Three month's interest will be 75.70 X 3 = 227.10. So interest on delay payment will be 151.40. So, he will pay 1151.40. In this, both interest on principal and on delay payment will be included.

Types of Interest Payments

1. Interest payments on govt. debt.

2. Interest payments on long term bonds and loans.

3. Interest payments on banks' deposits.

Related : Interest Subvention Meaning

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