In simple terms, an NBFC lends money and earns interest on what it lends. Interest income is the most major of its incomes. To this extent, it is a bit like a bank. But nowadays, they often fool people by hide the actual interest rate. They always offer you fixed interest rates and never mention IRR. IRR (Internal Rate of Return) is the indicator of interest rates you earn when you invest or lend. When you come to a financial institute for taking a loan, they always work with IRR, never using the fixed interest method for calculating the actual interest. Then the question is why they do such a thing? The reason a fixed rate may seem attractive is because it appears low compared to the IRR. However, a general borrower may not be able to understand the difference and may not calculate the interest correctly. Given an example for better understanding. Mr ABC borrow 10,00,000/- for 10 years @ 10.0% IRR per annum In that scenario, the EMI will be Rs 13,215 per month approx. for 120 months.I...
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