Amount Financed: What it Means, how it works

The financial world is filled with terms and concepts that may seem complex to the layperson. One such term that often confounds individuals is ‘amount financed’. This article aims to elucidate the meaning of amount financed, how it works, and answer some frequently asked questions about the concept. We’ll also delve into the realm of personal loans, specifically focusing on Airtel Finance.

Understanding ‘Amount Financed’

‘Amount Financed’ is a term used in the financial sector to denote the actual amount of money borrowed by an individual or a business. It’s principally the loan sum that the borrower receives from the lender. The term is predominantly used in the context of loans and credit and excludes any additional fees or charges incurred during the loan process, such as processing fees or interest.

How Amount Financed Works

The amount financed is the gross loan amount minus any prepaid finance charges. Prepaid finance charges include items like loan origination fees or interest charges that are paid upfront. Essentially, the amount financed is what you actually have available for use from the loan after all upfront fees have been deducted.

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Delving Deeper into ‘Amount Financed’

The concept of ‘Amount Financed’ is critical to understanding the true cost of borrowing. It is often confused with the ‘loan amount’, but the two are different. The loan amount refers to the original sum of money that the borrower requested. However, the amount financed is the actual sum that you, as a borrower, have access to after all upfront charges are deducted.

For instance, consider that you apply for a loan of Rs.1 Lakh with a processing fee of 2%. The fee amounts to ₹2,000, and when this is deducted, the amount financed that you would receive is ₹98,000.

The Impact of ‘Amount Financed’ on Repayments

The amount financed also impacts the repayment structure of a loan. Since the EMI (Equated Monthly Instalment) is calculated based on the amount financed, understanding this term can help you plan your finances more effectively.

The EMI consists of a portion of the principal amount (amount financed) and interest, which is calculated on the outstanding loan amount. Therefore, a lower amount financed leads to a smaller EMI, making it easier for the borrower to repay the loan.

Airtel Finance and Amount Financed

As we discuss about finance, we would like to throw light on our offering, Airtel Finance that provides quick and hassle-free personal loans ranging from ₹10,000 to ₹9,00,000. The interest rates are as low as 11.5% with flexible loan tenures ranging from 3 to 60 months. This allows the borrowers to set a monthly EMI according to their convenience and budget. 

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The entire process of applying for a loan with Airtel Finance is online, with zero paperwork, making it a very convenient option. One can apply and get the loan approved without stepping out, and the loan amount is credited to the account within just 24 hours. 

The processing fee for the loan ranges between 2-5% + GST, which is deducted upfront from the loan amount, making the amount financed the net loan sum received in your account.

FAQs

What is the meaning of ‘Amount Financed’?

‘Amount Financed’ refers to the total amount of money borrowed, excluding any additional fees or charges.

How is the ‘Amount Financed’ calculated?

It is calculated by subtracting any prepaid finance charges (like processing fees) from the gross loan amount. 

How can I avail a personal loan from Airtel Finance?

You can apply for a personal loan from Airtel Finance through the Airtel Thanks app. Head to the ‘Shop’ section, tap on ‘Airtel Finance’, and follow the prompts to complete your application.

How quickly can I receive the loan from Airtel Finance?

If approved, the loan amount is credited to your account within 24 hours.

How flexible are the repayment terms with Airtel Finance?

Airtel Finance offers flexible loan tenures from 3 to 60 months, allowing you to adjust the EMI as per your budget.

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In conclusion, understanding the ‘amount financed’ can help you better grasp the actual amount you will receive from a loan after deducting any upfront fees. With Airtel Finance, accessing and managing loans has become simpler and more convenient than ever before.