Why that "low rate" is actually loan sharking
Trap 1: credit-card installments at "0.6% monthly fee"
Many assume a 0.6% monthly fee equals 0.6% × 12 = 7.2% annually. That's badly wrong! Your principal declines every month, yet the bank charges interest on the full initial amount. Under IRR, a 0.6% monthly fee works out to roughly 13% a year — nearly double.
Trap 2: upfront interest deductions and front-loaded fees
Borrow CNY 100K with CNY 3,000 in fees deducted upfront and you receive 97K — yet interest and principal are computed on the full 100K. Returning part of the principal before you even have it dramatically raises your true cost. That's the classic upfront interest deduction.
Trap 3: "GPS fees" and "service fees" in auto loans
Dealers love "free" or ultra-low financing — then charge thousands in "financial service fees". Plug that fee into IRR and the "interest-free" loan often costs more than a regular loan.
What is IRR (internal rate of return)?
IRR is finance's gold standard for the true yield of an investment or loan. It respects the time value of money: the sooner money leaves your hands (upfront fees, principal repayments), the lower your capital efficiency — and the higher the true rate (IRR).
IRR is finance's gold standard for the true yield of an investment or loan. It respects the time value of money: the sooner money leaves your hands (upfront fees, principal repayments), the lower your capital efficiency — and the higher the true rate (IRR).