DreamCash Personal Loan – The Apportionment of Principal and Interest and Early Repayment Charge
Bank of Communications (Hong Kong) Limited (“The Bank”) uses “Rule of 78” method to breakdown of principal and interest in the monthly repayment of instalment loan. This method allows the interest payments decrease disproportionately during the course of the loan. The following example with the assumptions below illustrated the apportionment of principal and interest of DreamCash Personal Loan. This example is for reference only. All loan repayment terms should be subject to the Bank's final approval and discretion. Customers should refer to their Loan Confirmation Letter.
Example：
Assumptions：
Loan Amount | HK$100,000 |
Tenor (Months) | 12 Months |
Monthly Flat Rate | 0.32% |
Handling Fee | HK$0 |
Annualised Percentage Rate (APR)^ | 7.24% |
^ The APR is calculated according to the guideline set out in the Code of Banking Practice and rounded up/down to the nearest two decimal places. APR is a reference rate, which includes all applicable loan interest rates, fees and charges of the loan product, expressed as an annualised rate.
The Calculation of Principal and Interest shown below:
| - Monthly Repayment Amount | =HK$100,000/12(Repayment Tenor) + HK$100,000 x 0.32%(Monthly Flat Rate) |
| =HK$ 8,653.33 (Round up/down to 2 decimal places) | |
| - Total Interest Expenses | =HK$8,653.33 x 12 (Repayment Tenor) – HK$100,000 |
| =HK$3,840 |
- Based on the Rule of 78, the amount of interest paid each month：
| Interest | =Interest for the full term x [Remaining number of monthly payments/Sum of the number of monthly instalments in the loan (For 12 monthly payments,it will be =12+11+⋯+2+1=78)] |
| Example 1： | Interest of the 3rd month = HK$3,840 x (10/78) = HK$492.31 |
| Principal of the 3rd month = HK$8,653.33 – HK$492.31 = HK$8,161.02 | |
| Example 2： | Interest of the 8th month = HK$3,840 x (5/78) = HK$246.15 |
| Principal of the 8th month = HK$8,653.33 – HK$246.15 = HK$8,407.18 |
The breakdown of principal and interest in each monthly repayment is as follows:
No. of Intalment | Monthly Repayment Amount(HK$) | Principal Amount (HK$) | Interest (HK$) | Loan Outstanding (HK$) |
1 | 8,653.33 | 8,062.56 | 590.77 | 91,937.44 |
2 | 8,653.33 | 8,111.79 | 541.54 | 83,825.65 |
3 | 8,653.33 | 8,161.02 | 492.31 | 75,664.63 |
4 | 8,653.33 | 8,210.25 | 443.08 | 67,454.38 |
5 | 8,653.33 | 8,259.48 | 393.85 | 59,194.90 |
6 | 8,653.33 | 8,308.71 | 344.62 | 50,886.19 |
7 | 8,653.33 | 8,357.95 | 295.38 | 42,528.24 |
8 | 8,653.33 | 8,407.18 | 246.15 | 34,121.06 |
9 | 8,653.33 | 8,456.41 | 196.92 | 25,664.65 |
10 | 8,653.33 | 8,505.64 | 147.69 | 17,159.01 |
11 | 8,653.33 | 8,554.87 | 98.46 | 8,604.14 |
12 | 8,653.33 | 8,604.14 | 49.23 | 0.00 |
* Monthly repayment rounded up/down to 2 decimal places
Customers shall proceed the early repayment procedure at least 3 Banking Days in advance and advise the proposed date of early repayment which should be before the next repayment due date. Customers shall make full repayment of unpaid principal, the interest up to the next repayment date (according to the “Rule of 78”) together with all fees and charges and other outstanding amount of the Loan. Partial early repayment shall not be accepted. The charges are listed below:
Service | Fees |
Early Settlement Fee | 2% of Loan Amount plus HK$200 |
A 12-months loan of HK$100,000 at a monthly flat rate of 0.32%. If the Borrower makes early repayment 1 week before the 3rd month, the Borrower shall repay the follow amounts at the proposed repayment date:
(i) Unpaid principal of the loan : HK$83,517.96 (HK$100,000 - 16,174.35(HK$8,062.56+HK$8,111.79))
(ii) Interest payment of the next repayment date: HK$492.31
(iii) Early Settlement Fee: Loan amount x 2% + HK$200 = 100,000 x 2% + HK$200 = HK$2,200
1. Can I request an early repayment before the whole period is due?
You have agreed the terms and conditions upon the loan is accepted. To protect the interests of the Borrowers and Lenders, you could choose to make early repayment but an additional handling fee will be charged.
Customers shall call the Customer Service Hotline at 2239 5559 at least 3 Banking Days in advance and advise the proposed date of Early Repayment. Customers shall make full repayment of unpaid principal, the interest payment of the next repayment date (according to the “Rule of 78”) together with all fees and charges and other outstanding amount of the Loans at the proposed early repayment date.
Partial early repayment shall not be accepted.
The full repayment of the unpaid principal, the interest payment of the next repayment date (according to the “Rule of 78”) together with all related fees and charges shall be debited to the load account before the early repayment date.
The calculation of the early settlement fee is based on the original loan amount while the interest amount is subject to the approval status of individual customer. The saving of the interest is subject to the conditions. What time during the repayment period that the customer request for early repayment is also the main factor of this question. If the customer request for early repayment in the example illustrated above, the early settlement fee is HK$2,200 (HK$100,000 x 2% + HK$200). If the customer make early repayment 3 Banking Days prior to the 3rd instalment, the sum of interest payment from 4th to 12th instalment is HK$2,215.38. Compare to the early settlement fee (HK$2,200), the interest saved up by early repayment is HK$15.38. If the customer make early repayment after the 4th instalment, the amount of interest saved by early repayment is not enough to cover early settlement fee.
No. of Intalment | Monthly Repayment Amount (HK$) | Principal Amount (HK$) | Interest (HK$) | Loan Outstanding (HK$) | The sum of interest payment by early repayment (3 banking days prior to the instalment) | |
Sum of interest payment | Amount# | |||||
1 | 8,653.33 | 8,062.56 | 590.77 | 91,937.44 | from 2nd to 12th instalment | 3,249.23 |
2 | 8,653.33 | 8,111.79 | 541.54 | 83,825.65 | from 3rd to 12th instalment | 2,707.69 |
3 | 8,653.33 | 8,161.02 | 492.31 | 75,664.63 | from 4th to 12th instalment | 2,215.38 |
4 | 8,653.33 | 8,210.25 | 443.08 | 67,454.38 | from 5th to 12th instalment | 1,772.30 |
5 | 8,653.33 | 8,259.48 | 393.85 | 59,194.90 | from 6th to 12th instalment | 1,378.45 |
6 | 8,653.33 | 8,308.71 | 344.62 | 50,886.19 | from 7th to 12th instalment | 1,033.83 |
7 | 8,653.33 | 8,357.95 | 295.38 | 42,528.24 | from 8th to 12th instalment | 738.45 |
8 | 8,653.33 | 8,407.18 | 246.15 | 34,121.06 | from 9th to 12th instalment | 492.30 |
9 | 8,653.33 | 8,456.41 | 196.92 | 25,664.65 | from 10th to 12th instalment | 295.38 |
10 | 8,653.33 | 8,505.64 | 147.69 | 17,159.01 | from 11th to 12th instalment | 147.69 |
11 | 8,653.33 | 8,554.87 | 98.46 | 8,604.14 | Interest payment of 12th instalment | 49.23 |
12 | 8,653.33 | 8,604.14 | 49.23 | 0.00 | - | - |
#The amount of interest saved by early repayment before the 3rd instalment is enough to cover the early settlement fee (HK$2,200)
The above examples are for reference only. For any enquiries, please contact our Customer Service Hotline 2239 5559。
Bank of Communications (Hong Kong) Limited (Incorporated in Hong Kong with limited liability)