CASE ANALYSIS OF THE RELATIONSHIP BETWEEN LOAN INTEREST CALCULATION METHOD SELECTION AND ITS EFFECT ON CUSTOMERS

Abstract

Level of competition among banks in Indonesia to raise funds and distribute loans is very high. The competition takes place between the bank books 2, 3 and 4 in the fight over third-party funds. The main reason for customers to save and obtain credit is the interest rate. On the banking side, the setting interest rates on deposits are very competitive, so the impact on the cost of loanable funds is high. These conditions have an impact on the increase in the loan interest rate. If banks still maintain high lending interest rates, emerging risk include bad debts and turning away customers are the low level of interest rates. This study aimed to determine the interest rate calculation method used bank loans and its effect on customers. The method used is the study of literature with a case study approach. The results showed that the interest calculation method provides the highest returns flat method. On the other hand, consumers will tend to choose an effective method and annuity due to interest rate to be paid by consumers was lower than the flat method. This study suggests that the banks should determine the level of interest rates and should consider the cost of loanable funds and consumer characteristics.

Keywords: Flat Method, Effective and Annuity.