If you take out a loan, it is important that you know in advance how your interest is calculated.
One of the doubts when repaying the loan, as in contracts, is the way regular interest is calculated. When we talk about calculating interest, there are two ways bankers do it: the proportional method and the conforming method.
According to the proportional method, a different amount of regular interest is obtained, depending on whether the interest is calculated once at the end of the repayment period or several times during the repayment itself. If the interest is calculated several times during the repayment period, a higher amount of total interest is obtained, than if the interest is calculated only once, at the end of the loan repayment.
On the other hand, according to the convenient method, the same amount of regular interest is obtained, regardless of whether the interest is calculated once (at the end of the loan repayment) or several times during repayment.
Perhaps the way the bank calculates the interest rate does not seem important at first glance, but it is an important item, because it tells you how much interest you will pay on the bank loan.
(World/Kamatica)