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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4543
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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what rate of interest do finance companies generally gain Do

Resolved Question:

what rate of interest do finance companies generally gain?

Do you have an example or scenario?
Submitted: 5 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 5 years ago.

Dear Friend,

It is difficult to put a exact figure on this as the finance company gains much more over the year than they actually charge their customers on account of "Redeployment of money", which takes the annualized return on the same money much higher. Let me try and explain you with an example.

For example, a Credit Card company charges you 3% Per Month on the outstanding balance. Now, when you make partial repayments, the company receives so may repayments like this from customers, which in turn is lent to new customers.

What I am trying to emphasize that the same money is lent almost 3-4 times and has number of rotations, taking the annualized return or yield very high, to almost 32-36% Per year.

I hope this helps...

Warm Regards,

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