New Delhi, Nov. 29 -- The benefits that compounding brings to investments are well-known. But what is not commonly known is the fact that compounding can sometimes work against you too and can have negative consequences for your finances. We tell you three scenarios in which compounding can work against you.
Interest on loans
Compounding works when you allow the interest income you get to earn further interest income. In investments, you do this by letting the interest income you have already earned remain invested to earn more returns and this works to your advantage. But when you have to pay interest, say on a loan or other credit facility, then compounding will work against you.
Looking for a loan with a longer tenure to reduce the eq...