What is Jumping Interest Rate?
In the Gold loan Product, When customers delay their EMI payment, Lenders will increase the interest rate.
This rate goes over and above the base interest rate.
For example, Ram takes a loan for ₹10,000 on 1st August, and his next repayment date is 1st September with a 1% interest.
If he doesn’t pay, the interest for the following month will jump to 2%. After Ram started paying the amount properly, the interest rate went down to 1%.
A small twist:
In practicality, After the customer pays the default amount, changing back to a 1% base interest rate even is not happening 🙂
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