Bank vs. Relative
Loan strategy simulator
Material 3 Expressive

Should you lend to a relative, or just pay the bank?

You owe a bank that charges compound interest. You have a fixed monthly amount to put toward it. One month, instead of paying the bank in full, you lend part of that amount to a relative at simple interest - and pay the bank less that month. When the relative repays (principal + interest), that lump sum goes to the bank along with your usual payment. Does this leave you with a smaller loan balance than if you'd just paid the bank every month? Adjust the controls and find out.

The bank loan

रु
रु
Interest compounds monthly on the reducing balance. Each payment first covers interest; the rest reduces principal.

The relative

6
months
Auto-link to 4× bank rate
रु
Lent in month 1, in place of (part of) that month's bank payment. Chips set it as a fraction of your monthly payment.
⚖️ Verdict, at the month the relative repays
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Balance - pay bank only
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Scenario A, at month N
Balance - lend, then repay
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Scenario B, at month N
Difference
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B minus A

Outstanding principal over time

Scenario A - pay bank only Scenario B - lend to relative

Month-by-month ledger

Month A: payment A: balance B: payment B: balance Note
Assumptions this simulator makes
  • Bank interest compounds monthly: monthly rate = annual rate ÷ 12, charged on the balance before that month's payment.
  • In Scenario A, the full monthly amount is paid to the bank every month, starting month 1.
  • In Scenario B, month 1's bank payment is reduced by the amount lent. Months 2 through N−1 are paid in full as usual. In month N, the relative repays principal + simple interest, and that full sum is added to the normal monthly payment and sent to the bank.
  • Relative's interest is simple interest on the lent amount, accrued for the full N months: interest = lent × annual rate × (N ÷ 12).
  • If a monthly payment is less than that month's interest charge, the unpaid interest is added to the balance - this is shown rather than hidden.
  • The comparison point is month N, when the relative's repayment lands.