Get to know Bank Interest, Types and How to Calculate

Get to know Bank Interest, Types and How to Calculate

For those who have a savings account or have applied for a loan to a bank, you must be familiar with the term bank interest. As a customer or debtor, bank interest can have 2 functions, namely profits or obligations. But what is meant by bank interest as a profit and as a liability. The following is the definition of bank interest that you must know, including its functions and types.

Understanding Bank Interest

This term can refer to a form of remuneration provided by the bank to its customers. However, it can be interpreted differently depending on the point of view. In general, bank interest or savings interest is a number of profits that must be paid by the bank to its customers in return for the deposits of these customers. Later, this interest will be given within a certain period of time, it can be per month or per year.

However, bank interest can also be defined as a fee paid when paying for services for borrowing money provided by a bank within a certain period. Interest is determined by a percentage of the total deposit or loan amount.

Another understanding by quoting from the Big Indonesian Dictionary (KBBI), bank interest is the interest rate or rate that is justified by the bank on money loans. Meanwhile, the Financial Services Authority (OJK) defines bank interest as a number of forms of compensation given by banks to customers for funds deposited in banks.

The percentage of interest received varies, depending on the policies of each bank, economic situation, and other factors. In addition, the nominal that will be obtained by each customer is also different, calculated based on the total savings balance, time period, and interest percentage.

Types of Bank Interest
In general, bank interest is divided into 2, namely credit (loan) interest rates and savings (savings) interest rates, both of which have been explained in the sub-heading of the definition of bank interest. However, according to OJK, bank interest, which is further broken down, is divided into five different types.

The following are the types of bank interest available and each explanation:

Flower Type


Fixed Interest Rate (Fixed)

Fixed interest rate is a type of interest rate whose fees are fixed and do not change until the maturity date. So, even if there is an increase or decrease in interest rates in the market, the amount of interest you have to pay does not change. Some examples of the use of fixed interest rates are the People’s Housing Loans (KPR) Cheap Homes or Subsidized Homes and motor vehicle loans.

Floating Interest Rate (Floating)

The opposite of a fixed interest rate. The value of floating interest rates always changes according to market interest rates. Where if you like the interest in the market to rise, the interest rate that must be paid also goes up, and vice versa. An example of a floating interest rate is a mortgage for a certain period of time. Where the first year will use a fixed interest rate, then the next year using a floating interest rate.

Flat Interest Rate

The flat interest rate is an interest rate whose calculation refers to the initial amount of the loan principal and is divided proportionally for each installment period. How to calculate it is relatively simple compared to other interest rates. So generally, this interest rate is used on short-term loans for consumer goods such as cellphones, household appliances, and Unsecured Loans (KTA).

Effective Interest Rate

The effective interest rate is considered fairer for customers because it is generated from the calculation of the remaining principal amount of the loan each month in line with the shrinking of the debt that has been paid. The less the principal amount of the loan, the lower the interest rate that must be paid.

Annuity Interest Rate

The annuity interest rate is a combination of the flat interest rate and the effective interest rate. Where the interest is calculated from the remaining principal of the loan (effective interest rate), but is divided proportionally based on the repayment period (flat interest rate).

So, in the initial period, the amount of interest will be much greater than the amount of principal installments. However, as the loan term approaches the end, the interest amount will be smaller and the principal installment amount will be larger.

How to Calculate Bank Interest Rate
There are three ways to calculate that can be done to calculate the interest rate, both the bank interest rate for deposits and bank interest rates for loans. Here’s a full explanation:

How to Calculate Deposit Bank Interest Rate
Based on Average Balance
The method of calculating interest on savings per month with this method uses the daily balance as a benchmark, where the entire balance will be calculated using a formula and then the average result is taken.

How to calculate interest on savings per month based on the average balance using the following formula:

Savings Interest = Average balance x (Percent interest x number of days in a month) / 365 days

With the table above as a benchmark, you can start by calculating the average balance using the formula:

Balance x Day distance

50 million x 3 = 150 million
40 million x 5 = 200 million
50 million x 7 = 350 million
So, total average balance = 700 million / 28 = 25 million.
So, the calculation for your Savings Interest in that month is = 25 million x (5% x 28) / 365 = 95,890

So, the savings interest earned in that month is 95,890.

By Lowest Balance
The method of calculating bank interest this time is the same as the previous method, but the balance used refers to the lowest nominal. In the table above, it is known that the lowest balance is 30 million. So, the savings interest that will be obtained is as follows:

Savings Interest = Lowest balance x (Interest percentage x Number of days in a month) / 365 days

= 30 million x (5% x 28) / 365

= 115,068

From these calculations, it can be seen that the interest that Andre will get if it is calculated from the lowest balance is 115,068

Based on Daily Balance
The next way to calculate interest on savings is to use a daily balance. This method uses the daily balance recorded for the month. Simply put, every incoming balance will be calculated by the bank.

Formula used:

Savings Interest = Daily balance x Interest rate percentage x Day distance / 365 days

Based on the table above, you can calculate the daily balance interest rate starting from the first deposit as follows:

50 million x 5% x 3 / 365 = 20,547
40 million x 5% x 5 / 365 = 27,397
50 million x 5% x 7 / 365 = 47,945
So, the total interest based on the daily balance is 20,547 + 27,397 + 47,945 = 95,889

How to Calculate Bank Loan Interest Rate
For Flat Flowers
Flat interest is also the easiest way to calculate loan interest at the bank compared to others. Because, the amount of interest and principal

k in monthly installments will remain the same and do not change.

The way to calculate loan interest per month using the flat system is as follows.


Interest per Month = (Loan Principal x Interest Rate x Total Loan Term) / Number of Months in the Loan Term

For example, you borrow IDR 50 million for 12 months with 10% interest in a year, then:

Loan principal per month = IDR 50 million / 12 = IDR 4,166,666.67
Interest per year = IDR 50 million x 10% = IDR 5 million
Interest per month = IDR 5 million / 12 = IDR 416,666.667
So, the monthly installments you have to pay are IDR 4,166,666.67 + IDR 416,666.667 = IDR 4,583,333.34

Effective Interest
The way to calculate loan interest per year with an effective system is as follows.


Interest = Remaining Principal Loan Previous Month x Interest Rate per Year x ( 30 days / 360 days)

For example, you apply for a loan worth IDR 100 million with 10% annual interest for 12 months, then:

Principal monthly installment = IDR 240 million / 12 = IDR 20 million per month.
1st month interest = (Rp240 million – (1-1) x Rp20 million) x 10% / 12 = Rp2 million.
So, the total installment for the 1st month is IDR 20 million + IDR 2 million = IDR 22 million.
2nd month interest = (Rp240 million – (2-1) x Rp20 million) x 10% /12 = Rp1,833,333

So, the total installment for the 2nd month is IDR 20 million + IDR 1,833,333 = IDR 21,833,333

And so on until the 12th month, which is (Rp240 million – (12-1) x Rp20 million) x 10% /12 = Rp166,666

Annuity Interest
In calculating annuity interest, the amount of the principal installment of the loan will increase, while the amount of interest will decrease. The goal is to make it easier for customers to pay off monthly installments and not be confused by changing amounts. Here’s an example.


Interest = Remaining Principal Loan Previous Month x Annual Interest Rate x (30 days / 360 days)

For example, you borrow a loan of Rp. 100 million with an interest of 15% per year for 12 months, then

The principal installment of the 1st month is IDR 7,775,831.23
The 1st month interest installment is IDR 1,250,000.00
So, the total installment for the 1st month is IDR 9,025,831.23
The 2nd month principal installment is IDR 7,873,029.12
The interest installment for the 2nd month is Rp1,152,802.11
Then, the total installments for the 2nd month are the same, which is IDR 9,025,831.23

Understand Well
Whether as part of profits or liabilities, understanding well what bank interest rates are can help you in many ways. For example, when you are going to make a term savings, you can calculate how much profit you can get and of course you can plan your finances better.

Likewise in understanding bank interest rates as loan interest. By understanding well what the bank loan interest rate is and how to calculate it, you can apply for a loan according to your financial ability so that there are no delays in installments.