Loan Amortisation & Bank Charges Calculator
Computes Nigerian commercial bank loan amortisation schedules on reducing balance, converts misleading flat interest rates into true APR, and computes upfront facility fees.
Computational Framework & Statutory Formulas
PMT = Principal × [r(1 + r)^n] / [(1 + r)^n - 1]
Equivalent Reducing APR ≈ [Flat Interest × 2] / [Principal × (Tenor in Years + 1 / Periods)]
Net Proceeds = Facility Amount - (Management Fee + Processing Fee + Commitment Fee + Legal Search Fees)
Nigerian Economic & Statutory Context
In Nigeria, commercial bank lending rates are tied to the Monetary Policy Rate (MPR) set by the Central Bank of Nigeria (CBN). Upfront bank fees typically include a 1% management fee, 0.5% processing fee, 1% commitment fee on undisbursed funds, and legal perfection expenses. Understanding the effective borrowing cost (APR) is critical for corporate solvency.
Frequently Asked Questions (FAQ)
Why is a 15% flat loan rate much more expensive than a 15% reducing balance rate?
In a flat rate loan, interest is computed on the entire original principal for the full duration, regardless of how much principal has already been repaid. On an amortising loan, interest is only charged on the remaining unpaid balance. A 15% flat rate for 3 years translates to an effective reducing rate (APR) of approximately 27% to 28%.
What upfront fees do Nigerian commercial banks typically deduct on facilities?
Nigerian banks routinely deduct upfront fees including facility management fees (1%), processing/appraisal fees (0.5% - 1%), commitment fees (1%), alongside legal documentation, title perfection, and stamp duty charges.
Can business loan interest be deducted for Company Income Tax in Nigeria?
Yes. Under Section 24 of CITA, interest on loans borrowed and utilized wholly, exclusively, necessarily, and reasonably in producing business profits is an allowable tax-deductible expense, subject to interest limitation rules under the Seventh Schedule.