₹2 interest per hundred: what it really costs
In many places a private loan is quoted as "₹2 interest" or "2 rupees per hundred": ₹2 for every ₹100, every month. It sounds small. As a yearly rate it is not.
The conversion
₹R per ₹100 per month = R% a month = R × 12 % a year (simple interest)
| Quoted | Per month | Per year (simple) | Per year if interest is added monthly |
|---|---|---|---|
| ₹1 per hundred | 1% | 12% | 12.7% |
| ₹1.5 per hundred | 1.5% | 18% | 19.6% |
| ₹2 per hundred | 2% | 24% | 26.8% |
| ₹3 per hundred | 3% | 36% | 42.6% |
| ₹5 per hundred | 5% | 60% | 79.6% |
For comparison, bank home loans and gold loans usually charge far less than 24% a year; check your bank's current rates.
Example: ₹1,00,000 at ₹2 per hundred for one year
- Interest each month: ₹2,000
- Simple interest for 12 months: ₹24,000
- If unpaid interest is added to the loan each month (compound, chakravaddi): ₹26,824
Before borrowing
- Ask whether interest is simple or compounded and what happens if a month is missed.
- Compare with a bank or NBFC gold loan; it is often far cheaper.
- Get the terms in writing.
Try your own numbers with the rupee interest calculator.