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updated 16 September 2008, 13.30hrs. Menu (link):XL Downloads page What I Did What Westpac Bank did What you can do Solution

READY RECKONER [Compound Interest Rate to Simple Interest Rate]

RATE INCREASE When LOAN WILL NEVER BE PAID OFF !!!

VIEW Documents VIEW Jan 2008 COURT DECISION Confirming the Compounding Monthly

Brief features of this case:

1. The question before Justice Bowman on 18^th June 2007 & 20 June 2007 was to decide if there is a case at all on our side, to schedule further arguments.

2. The Judge heard NAB's counsel for 25 minutes. Then heard me for 50 minutes on 18th June. On 20^th June allowed me to speak for 40 minutes against CBA, on behalf of my (more at 'B 4' in 'view documents' page) "friend" Mr Praveen Rao, who claimed not knowing much in law, but immediately after 20^th June, he told me that Justice Bowman would ‘club both cases’ and give his judgment. But it is a miracle/magic/Praveen's skills that Justice Bowman exactly did the same in 'black and white'!!!. Praveen's skills

3. On both days after my submissions, the Judge ‘reserved the judgment’. No further contacts or communication until 23^rd January 2008. He decided not to schedule further hearings, on the only grounds, that loan contract shows 'total amount repayable over the term of loan’. Please read below…..

Yesterday/Tomorrow to You, Today to Me!!!

What I did about it:

Our ancestors who wrote Constitutions of Democracy made 4 different 'supposedly' independent authorities to ensure 'balance of power' to avoid possible take over of a country by one group. The pillars of democracy are;

(1) Popularly elected government (PM is the head) to do legislation policy making and monitoring

(2) Government departments (like ASIC, ATO, APRA, ACCC, DPP, Governor General is the head in Australia and else where called President or whatever is the title) who administer the policies and law made by popular government

(3) Media, to bring out any deficiency in the mechanism of 1 and 2 and finally

(4) Judiciary, to resolve any conflicts and to prepare and advise preparation of new legislation due to new situation arising. Each one can over ride the decisions of another where an exception is required. That is how balance of power is maintained in constitution.

Though my definition of democracy is; in a group of 10 adults, say 5 are 'non sense' people, 4 are brilliant and good hearted and 1 average but 'clever'. The clever one can join hands with 5 non sense people and declare the 4 brilliant ones as 'mad' and write them off!!

My comparison of 'communism' with 'capitalism/market believing in competition' is: A pizza is made for 4 people to eat (4 people as population of the country and pizza is the wealth of the country); communism would divide the pizza by four, regardless of who worked for it who made it, who is hungry etc. Capitalism/ competitive market would tell the 4 to eat as much as they can at their best ability but would request them to eat as per their contribution in making pizza, but who would hear all those, once it is made available for the 4 the 'fittest gets the best'.

I approached the four pillars of the democracy as follows:

1. Political:

"Politics is the last resort for scoundrels", said Jawaharlal Nehru, when he was serving as Prime minister of India. Since the impact of this conspiracy is huge, I realised that the lenders on their own would not agree they are compounding. So first I sent emails to then PM John Howard and the Treasurer Peter Costello. Since no response for sometime from them, I sent emails to other members of Federal parliament. The following is the list of few members of parliament Canberra; I sent emails, in September 2006 with detailed explanation of the matter listed above;

The following is the list of few members of State Parliament of Victoria in April 2007, I sent emails with more details of compounding interest and how the VCAT has been ‘brain high jacked’, in my case C111/2007 Hariharan Iyer Vs Westpac Banking corporation, by the special counsel who appeared for Westpac all of a sudden on 19^th March 20007 from nowhere:

No one would speak anything about this or would bring this to public notice.

Federal Treasurer, Wayne Swan, wants the borrowers to ‘punish’ the banks by moving the loans elsewhere. In April 2008, a young lock smith, when I described about the compound interest and its impact, asked me ‘why Wayne Swan cannot pass a legislation in parliament that Lenders should charge simple interest and not compound interest, or at the least compel all lenders to disclose they charge interest compounding monthly and its impact?’

I have no answer to this. Obviously, if the elected representatives are the only group that can pass legislation to get relief from the above ‘daylight robbery’.

Alternatively why not Wayne Swan, remove Regulation 33F, Consumer Credit Code of Queensland 1994? Interestingly why should Regulation 33F, recognise compounding frequency in the interest rate.

Why not Uniform Consumer Credit code (a Federal Legislation) spell out that the default interest method is Simple interest, unless clearly stated in the contract? (Interestingly like our bank loan document, even the legislation (accidentally??) omits the words compound or simple, in the entire legislation.

2. Departmental:

Sent email to Reserve bank of Australia rbainfo@rba.gov.au, ASIC (Australian Securities and Investments Commission, a corporate watchdog, response attached) ATO (Australian Taxation Office, response attached) APRA (Australian Prudential Regulation Authority, a licensing body for lenders business, response attached) Ombudsman (a dispute resolution mechanism funded by the banks, response attached) ACCC (Australian Competition and Consumers Commission, a consumer watchdog, response attached) are some of the entities I approached.

You can read for yourselves the attached correspondence from these, it is so humorous, and you will find we live in a land where the law forgot to fix responsibilities about lenders to any of the bodies.

If knowing that ATO is the single largest looser in this game, as the compound interest is NOT deductible under tax law and its interpretations. Allowing the interest shown in the bank statement as tax deduction means that our tax department bears the cost of loans of business and investment tax payers and out of the income so earned by the banks, the ATO gets 30% of it as income tax from those lending institutions. Isn’t it brilliant enough and is it not sufficient reason as to why we have to pay 10% GST on almost all items and pay 48.5% income tax or start paying tax when we earn just over $6000 a year. Few letters to ATO attached. ATO’s response attached.

3. Media:

Both print media and audio visual media were contacted, but they may not bother or part of the gang?? Channel 7,9,10,ABC, SBS, today tonight, current affair, 60 minutes, four corners, Sunday, The Age, Herald sun and other print and television media are all aware of the issues I raised, as I sent the details to all these programs, but those that replied were not interested in bringing this matter to the media. Why, perhaps all their advertisement revenue or sponsorship comes from these banks??

The following email IDs to which the TV media were sent the details:

edletters@afr.com.au, today@nine.com.au, aca@nine.com.au, 60minutesmailbag@nine.com.au, hotline@sbs.com.au, actionnetwork@bbc.co.uk, breakfast@3aw.com.au, nmitchell@3aw.com.au, esigley@3aw.com.au, hinch@hinch.net, newsbeat@bbc.co.uk, newsdesk@theage.com.au, newsroom@news.com.au, info@personalfn.com,

4. Judiciary:

Before going to Court:

Contacted senior reputed legal firms in Melbourne and many non profit bodies that act/pretend to act on behalf of the borrowers in trouble, no one had confidence to take the bank to court.

So without legal representation, just with my legal knowledge of teaching for 2 years, various Australian Law (including Trade Practices Act and Court Room Procedures), I filed my first case against Westpac Banking Corporation in Dec 2006.

Against Westpac:

I filed 2 cases against Westpac Banking Corporation both in VCAT, ref C111/2007 (filed on 19^th dec 2006, registered by VCAT on 9^th January 2007) and C1937/2007 (filed on 21^st March 2007, registered by VCAT on 30^th March 2007). Both Hariharan Iyer Vs Westpac Banking Corporation.

Both have NOT been placed in legal database, though on both were dismissed and in the first one I paid $ 10,000 to Westpac and in the second $ 13,000 approx to Westpac, full transcripts are in ‘View documents’ page of this site now.

First case against Westpac:

Though my application was received by VCAT on 19^th Dec 2006, there was a call from them advising me to withdraw my application and file it under ‘Credit List’ and not under ‘Civil List’. Though I was forced to accept this on phone, the same day I faxed and demanded my application be heard under ‘Civil list’. Vcat reluctantly accepted my application under civil list on 9^th Jan 2007 for a ‘directions hearing’ on 22^nd Feb 2007. (Copy of my case).

I was put in witness box, in my debut appearance in court and was tried for about 1.5hrs and not allowed to present my case and not allowed to examine Westpac side.

On 19^th Feb 2007, I received a fax from Westpac’s solicitors wanting to speak to me before the hearing on 22^nd Feb. I sent the copy of the fax to VCAT for them to respond (as the bank has been already served notice of my case).

On 22^nd Feb 2007, Deputy President Ms B Steele of VCAT, in presiding over the directions hearing, spoke most part of our 1 hour (plan of time and witness to be produced and the court encouraging me to go for compulsory conference etc) arguing against my case (Westpac lawyers hardly spoke few words). Then she scheduled the full day hearing of the case (as I rejected the offer of confidential compulsory conference with the bank) for 19^th March 2007 from 10.a.m., and if the case is not concluded on that day, I can apply for injunction against the bank’s lending practices in Victoria (as I demanded immediate injunction on 22^nd Feb 2007, for the bank’s failure to comply with legislative requirements on Mandatory Comparison Rate effective 1^st July 2003).

On 8^th March 2007, one page fax from VCAT advised ‘due to member’s availability the hearing will commence from 2.p.m on 19^th March 07, in stead of 10.a.m. (is it due to any intervention by any resource person?). I had no choice but to agree. But I put the condition that regardless of starting time, I need about 4 hours to present my case.

On 9^th March 2007, I received a letter from Westpac lawyers as their submission in defence. This was a hopeless defence and I knew I will ‘walk over’ such defences on 19^th March. I discussed in detail about this with 2 of my “friends” on 11^th March 07.

It was a long weekend till 12^th March. On 13^th March evening, I received a courier from the Westpac lawyers as their defence. This sounded like a threat to me, as the letter told who would be the Judge to hear the case on 19^th March and what defence the lawyers would adopt, but not who will appear on behalf of Westpac!.

On 19^th March 2007, in the court room, a sudden appearance by Mr Strong as counsel for Westpac (please note that Vice President Judge Strong, of VCAT is NOT this Mr Strong, may be they are twins or related but not one and the same). If Mr Strong is related/twin brother with Judge Strong (I deduced this going through internet and then physically attending one court session presided by Judge Strong), the ‘conflict of interest’ prevailed in VCAT in my case. Judge Strong was then a Vice President of VCAT in as much as Judge Harbison was then.

Justice Stuart Morris was the president and a Judge of Supreme Court of Victoria then. Since my application claimed exemplary damages of $1 billion, my case would perhaps been heard by the President, as he headed ‘Civil List’ then. Possibly, due to some ‘play up’ on 8^th March by someone, the hearing time was changed from 10.00a.m to 2.15 p.m. and possibly the same ‘conspiracy’ worked to change the presiding judge too!!! It is important to note that Justice Stuart Morris abruptly resigned from VCAT and Supreme Court on 21^st March 2007 night. My case was dismissed by Justice Harbison on 20^th March 2007. 21^st March 2007 morning I filed the second case C 1937/2007 against Westpac in the same court and also sent a request for transcript of 19^th and 20^th March hearings. May be there is a procedure that the President hears the audio of the proceedings before it goes to the transcription agents, to ensure no tampering at any point!!!

The judge to preside over was Vice President Justice Harbison (she heads the ‘anti discrimination wing’ of VCAT, while Vice President Justice John Bowman heads the ‘Civil list’ wing of VCAT):

Justice Harbison, in spite of my objections that Mr Strong’s appearance was never notified to me (I told her that was my first appearance in a court situation), allowed him to represent. Mr Strong’s identity was not confirmed by the Judge nor did he produce any document entitling him to represent on behalf of Westpac. Mr Strong was sitting on the bar bench, throughout the proceeding. I thought it may be the system in Australia to do so. But on 18^th June 2007, Justice Bowman, advised us to ‘stand’ and present the case, which both Mr Chris Archibald and myself did. So obviously, Mr Strong was stronger than Justice Harbison that she did not mind him sitting and presenting.

She asked Mr Strong as to how he wanted the proceedings to go (whether I present first or be put in witness box). He opted for putting me straight into witness box. I have been questioned for about 1 hour (I was wondering whether I was the offender or the bank). Anyway, I answered as I have nothing to hide or worry. Case was adjourned to the following day.

It is interesting to note here, that Mr Strong vehemently argued before Justice Harbison at VCAT, that Westpac is NOT charging Compound interest and that Mr Iyer’s understanding of compound interest is unique!!!

Before entering the court room, the court Clarke, Mr Bill Swayne, came out to tell me that the proceeding will not last for long that day (I never asked him or prompted him to talk anything to me). I told him, but I want to cross examine Mr Strong, yesterday he had his go, but today my go, I prepared the whole of last night without sleep. He replied, if you didn’t sleep I can give you a ‘coffee’, but allowing you to cross examine is left to the Judge (I was wondering then what this fellow was trying to do by talking to me rubbish).

Inside the court, Mr Strong had the first go; he took permission to requote some of the historical cases (as he said he quoted them wrong on 19^th March 07). He quoted a few and stopped. Judge Harbison declared that my case was dismissed. Immediately Mr Strong said, Westpac files a case for $50,000 to be paid by Mr Iyer as costs. Justice Harbison, sought permission from Mr Strong to ‘fix’ the costs. She fixed it to $ 10,000 payable by 30^th April 2007.

All these made me to wonder that he should be some prominent figure. So I searched on internet to get his details. To my surprise I found Judge Strong’s name in VCAT. Andrew, a friend, brought out the photo from internet and he too identified him to be the one who appeared for Westpac. Not to leave any loose ends, I went and sat in public gallery when Judge Strong was to ‘sentence’ a person and provide ‘judgement’ in another case. I looked at him and heard him to confirm the voice. Based on these, I mentioned above that he could be twins/related to Mr Strong.

Second Case against Westpac:

On 20^th March 2007 I was ordered to pay $ 10,000 to Westpac. Next morning, I filed a new case against Westpac in the same court for the way the bank staff caused misunderstanding regarding the way they charge interest. On 10^th May 2007, Mr A.Vassie heard and dismissed the section 75 application from Westpac, and ordered me to pay Westpac. But on his own words on 29^th March 2007 in V564/2007 Hariharan Iyer Vs National Australia Bank, declared that a section 75 application can be heard and determined ONLY by a judicial member, which he was/is NOT. This situation was reaffirmed by Justice Bowman on 18^th June 2007 in C564/2007 Hariharan Iyer Vs National Australia Bank, in opening speech, Judge disclosed he has shares and has a trustee position for superannuation wing of the bank. He asked me if I had any objection for him hearing the section 75 application filed by NAB. He wanted me to note, if I had objection to him hearing, there are only 2 Judges in VCAT that could hear such application, one being himself and the other Justice Harbison. Obviously, Mr Vassie, even on 18^th June 2007 was NOT entitled to hear and determine section 75 application, but he did on 10^th May 2007!!!

Mr Vassie on 29 March 2007 in C564/2007 Hariharan Iyer Vs National Australia Bank ( a similar case to one against Westpac), in 'directions hearing' provided 2 weeks for NAB to file affidavit relating to their intention to file section 75 application and allowed 2 weeks after the date of their filing section 75 application, for me to file affidavit of my defense.

In my case against Westpac C1937/2007 Hariharan Iyer Vs Westpac Banking Corporation, filed on 21 March 2007, registered by VCAT on 30 March 2007, 'directions hearing' was scheduled for 10 May 2007. On 4 May 2007 Westpac filed section 75 application with VCAT. I received notification from VCAT on 8 May 2007 (though the notification bears the date 4th, as 4 May was a Friday) advising that section 75 hearing is included for 10 May 2007 'directions hearing'. This was heard and dismissed by Mr Vassie. Firstly in his own words he is NOT eligible to preside over this kind of application. Secondly, he had a sensible approach on 29 March 2007 to give 2 weeks for either side to file affidavits, but on 10 May 2007 he had been brain jacked by the presence of Mr Strong that he did not think that I needed time to prepare my defense.

So next time when I go to VCAT should first ask the question to the presiding officer whether he/she is rightfully there are they are sitting there as a "sham" arrangement!.

Against National Australia Bank and Commonwealth bank:

I filed one against National Australia Bank C 564/2007 and Mr Rao against Commonwealth Bank of Australia C556/2007.

As it stand currently Justice John Bowman, gracefully permitted me to present my case on 18th June 2007 (against NAB) and on 20th June 2007 (against CBA) and reserved a decision on 'whether I have a case to continue or no case at all and summary dismissal'. He came back on 23rd January 2008 (after 7 months) and agreed, in as much as Mr Chris Archibald, special counsel for NAB agreed in the court on 18th June 2007, that interest is compounding on monthly basis. I was overseas and as such requested VCAT in December 2007, to postpone a case I registered against Justice Harbison (scheduled for hearing on 30th January 2008) to be postponed as I was unable to return and the court refused postponing the case, so I had to withdraw it). He dismissed my case because in the loan contract 'total amount repayable' (if the loan has run for its entire term), is disclosed. Please read the interest issue part of this site as to how reliable this 'total amount repayable' stated in the contract is correct or appropriate.

These are some of the excerpts of what Mr Chris Archibald, special counsel for NAB said inside the court:

"It is agreed that interest has been compounding on a monthly basis. Thus, the actual numbers and details are not of concern, but rather the dispute centres upon whether the method of calculation was disclosed"

These are some of the excerpts of what Justice John Bowman, then Acting President of VCAT said in his judgement:

"I must thank the parties (and, in the case of the NAB, those representing it) for the very civil and instructive way in which this application was presented. Mr Iyer had obviously done an enormous amount of work in preparing his submissions. Whilst clearly having passionate and committed beliefs concerning the NAB and banking institutions generally, he then advanced those submissions in a most polite, respectful and orderly fashion. While some of his arguments may not have been to the point, he had obviously done a large amount of research, some of it quite technical, but was nevertheless able to express quite complicated accounting and mathematical propositions in terms which could be understood. I am grateful for his assistance, and also that of Mr Archibald"

"The civility and mutual respect demonstrated at the bar table was exemplary”. “I appreciate that Mr Iyer is deeply committed to this cause". "However, the sad fact is that, despite the enormous amount of time and energy which he has put into this action, in my opinion it is absolutely bound to fail. The defences outlined by Mr Archibald on behalf of the NAB are such that the claim is answered completely and is rendered hopeless and untenable. In other words, I am of the view that the NAB has discharged the very heavy burden which it bears"

31. In considering why the NAB succeeds and Mr Iyer’s application is bound to fail, the following agreed or uncontested facts should be considered" "The concept of paying compound interest may be repugnant. That this is what the loan contract provided seems to me to be abundantly clear. Furthermore, the total amount to be repaid should the contract run its full distance of 25 years is specifically spelt out".

Solomon Vs Solomon & Co Ltd

Yet we have examples of Solomon Vs Solomon & Co Ltd established as per British law in 18th Century where Mr Solomon used the constitution of Company law to defraud his suppliers. The supplier took him to courts and the courts did identify his intention to defraud suppliers, so did not want to acknowledge the existence of the Company Ltd as an entity, as they wanted to deliver true justice to society. Solomon took it to 'Privy Council' of the Parliament to see if those parliamentarians honour their own law, which they did and Solomon got free of debt, effectively cheating his suppliers.

But we have our courts here, the Judges understood the impact caused by the lenders on the society, understood the trouble I took to reach up to them, but dealt with me as you can notice from the preceding pages and in 'view documents' page.

Our politicians, I have approached both in Canberra and in Victoria, regardless of the political party they belong to, so that like 'Privy council' in Australian System, they can make sure the law they made is adhered by these lenders, but we find the lenders are the ones running the country, perhaps through their representation in some way. The law makers themselves do not support the implementation of the legislation by influencing re roaster of the judge to hear my case and to hush up the case!!!.

When i taught Criminal Codes Act in Victoria, I appraised the students that the criminal law is very weak to the extent that a defence lawyer does not have to prove that his client has NOT committed the crime, it is sufficient if the defence lawyer 'creates a doubt' in the minds of at least one of the 12 'juries' that there exists a possibility that the accused 'may not necessarily have committed' the crime. This is because of the religious philosophical background of the country that they do not mind a 1000 criminals escaping punishment but will ensure that NO INNOCENT is PUNISHED. This is the situation for the criminals themselves in countries like Australia.

But what happened in my case? i am not the one fraudulently charged interest and ripped of Australians, but took the industry to the court proving the point. What Justice ? Harbison did, she gave the judgement that she did not want to go through whether the interest is compounded or not (this is the essence of my case itself, but she did not want to decide on that, please read the transcript from View documents). Contrarily, dismissed my case and penalised me to pay $ 10,000 to the offender, Criminal, Westpac Banking corporation!!!

What Mr Vassie did? Went a step above in presiding over a case that on his own words he was not entitled to preside over and gave permission for 'Special counsel' Mr Strong to represent for Westpac Banking corporation against myself, a self represented applicant. Mr Vassie awarded 'full indemnity' of costs to Westpac that made me to pay about $13,000.

What more is, that these cases have not been registered/ made available to public from the legal database of Australia, successfully hushed up.

I cant blame them, it is the teacher who taught these people the method of deriving judgement, who need to be blamed. It is wonderful that such people can eat, sleep and live comfortably after penalising an innocent self represented litigant. They would also be fully aware that i was not pleading the case for my sake alone, they knew it will set a precedent and will ensure all Australians are provided appropriate justice through my case.

Please view from view document part of this site.

Since C564/2007 against National Australia Bank, proves DEFINITELY all banks do charge interest COMPOUNDING MONTHLY, it is clear Westpac LIED in the COURT. That was not the end of it; Mr Strong demanded that the court award damages for costs against me $ 50,000 for bringing them to the court. I have been ordered to pay $ 10,000 before 30^th April 2007, which I have no option but to comply with.

My second case on 21^st March 2007 in the same VCAT against Westpac was to prove that it is Westpac’s officials who drove me to the issue as they have given in writing that on my loan they did charge ONLY simple interest.

I have been THREATENED by Westpac to pay the cost on second case before 16^th April 2008 (otherwise the bank will go for seizure of my property). I had no choice but to pay.

Are these employees idiots in the bank or the bank itself is an idiotic one that they don’t know what they are doing except to do what they did to me??

My loan was a variable home loan paying fortnightly $ 482.31 at 6.55% p.a., $ 150,000 for 25 years)

Of the 4 different numbers shown in the document, NONE of the numbers is CONSTANT/ CERTAIN!!!

Instalment repayment amount of $ is not fixed (can vary as per market interest rate)
Rate of interest is not fixed (can vary as per market interest rate. Though can fix it for some time, but cannot be fixed for entire period, 25 years!!)
Total $ amount repayable (over 25 years) is Not mentioned at all (though my loan document with National Australia Bank Limited, mentions this but NOT CERTAIN/CORRECT, due to points 1 and 2 above)
No where the contract discloses that rate applied is 'Compounding Monthly' or 'INTEREST on INTEREST' or 'Interest on MONEY NOT LENT'.

Somewhere in the 14^th page of 25 pages agreement the following sentences exist: “Order of applying repayments:

1. Fee and charges payable to the Government

2. Fee and charges payable to the Lender

3. Interest accrued on the loan

4. Principal owing to the lender”

Swapping the order of 3 and 4 makes the difference between Simple Interest and Compound interest in the calculation. Is this understandable for anyone??? This is where ‘COMPOUNDING MONTHLY’ is HIDDEN

Why is it hidden?

Some one would have already worked this out in the last 40 or 50 years;

That unless you make lump sum additional payment, (if regular repayments mentioned in the contract are the only amount repaid for 40 years or 30 years or so), you will NEVER pay even $1 off your loan principal AND at the end of paying so many years, and you will owe MORE than what you borrowed. (See Rate Increase).

Features of Compound Interest:

The longer is the duration of loan (40 years, 30 years etc as against 5 years and 10 years), the higher is the actual rate charged, for any given rate quoted.

The more the frequency of compounding (that is number of times interest is added to principal within a year, 12 times a year, when compounding monthly, as against twice a year, when compounding half yearly) the higher is the actual rate charged, for any given rate quoted.

What we know in market rate is, interest rate for a 5 year loan is higher compared to the rate for a 25 year loan. But it is quite opposite when the quoted rate is applied on compounding basis.

Imagine the market interest rate increases; say by 1.5% p.a. (if the rate was say 6% p.a. when you took the loan. Assume increase by 0.5% p.a. if the rate was, say 8.5% p.a. when you took the loan):

(1) The new rate will be applied and interest will be charged at the new rates. Though it appears acceptable to many, I still have a question on this. When the lender and borrower know this is a long term loan, since the lender lends the money they have at their disposal at the time of borrowing, why not the rate be fixed for the entire term of loan!!! That is where the catch is. The banks want not only the interest on money they lent, but also the interest on money NOT LENT + the opportunity cost of interest rate when the rate goes up!!!! There is no choice for a variable interest loan borrower (even fixed rate borrower will face the tune when the fixed term period ends. Till then Variable interest borrower offsets the banks the profit shortfall caused due to fixed rate borrowers). Even if you believe it is ok, I agree with you regarding their right to charge the new rate of interest.

(2) Some loan contract provides for the borrower to choose either (a) make an increased repayment or (b) increase the period of repayment. Let us say that I chose (b) as my right conferred in the loan agreement, do you know that I will NEVER be able to repay the principal even a dollar in spite of regularly repaying the instalments for all 25 years!!! If I chose option (a) my income has not increased to keep pace with increase in interest rate and I may have to default and lose the home eventually.

(3) If the interest rate remained the same throughout the loan period, still (the swap of step 3 and 4 listed and quoted above) we pay at least 42% of the actual loan borrowed as interest on money NOT lent (as interest on interest) and about 40% of loan sum borrowed is the Simple interest entitlement for the lender!!

Do you know that all interest we pay wherever we live in this globe, whatever type of loan we take, we ALWAYS pay COMPOUND INTEREST (interest on money borrowed and not borrowed, interest on interest) and not Simple Interest (on the actual money borrowed, less any money repaid). It is only the frequency of compounding period that may vary between one country and another. For e.g. compounding may be monthly in one country, but compounding quarterly or compounding half yearly in another.