Question 1

What is the real overpayment on a loan?

Accepted Answer

Nominal overpayment is the difference between total payments and the loan principal. Real overpayment accounts for inflation: money you pay in 2–3 years is worth less than today's money. Real overpayment shows losses in today's purchasing power.

Question 2

Why does high inflation benefit the borrower?

Accepted Answer

With high inflation, you borrow today's money but repay with devalued currency. If inflation is 15% per year, in one year your currency is worth 15% less — the bank receives back less real value. That's why taking long-term fixed-rate loans during high inflation can be advantageous.

Question 3

How is real overpayment calculated?

Accepted Answer

Each monthly payment is discounted by the accumulated inflation at the time of payment. A payment in 12 months is divided by (1+inflation)^12, in 24 months — by (1+inflation)^24. The sum of such discounted interest portions is the real overpayment.

Question 4

What inflation to use for Uzbekistan?

Accepted Answer

Official inflation in Uzbekistan was 8–12% in recent years. For a conservative calculation, use 10–12%. If taking a loan in USD, use US dollar inflation — about 2–4%.

Question 5

Does this mean a loan is better than a deposit at high inflation?

Accepted Answer

Not necessarily. Banks factor inflation into the rate. The key metric is the real interest rate (nominal rate minus inflation). If the loan rate is 22% and inflation is 10%, the real rate is about 12%. A deposit at 24% with the same inflation gives a real yield of 14% — the deposit is better.

Real Overpayment (Inflation-Adjusted)

Nominal and real overpayment

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