# Taking a loan to pay another loan with the same interest

I had a discussion with family members about how taking a loan to pay another loan with the same interest is basically wasting money and they didn't agree.

To make things clearer, say loan 1 is 100 000 $$\\\$$ with a fixed monthly rent of 10 % in a 10 months (to make the numbers nicer). When loan 1 has 50 000 $$\\\$$ left you decide to take a loan 2 to pay of the remainder of loan 1 before the ten months are completed. Now here is where the disagreement starts. I say that you have to pay the 50 000 $$\\\$$ plus an interest of the remaining 50 000 $$\\\$$ (I assume it's 10 %, but in a real case scenario it might be different) and then on loan 2 you would have to continue with a 10 % interest on loan on the 50 000 $$\\\$$. In the end you would thus lose money by taking a second loan. So my question is then: Is my assumption of having to pay interest on the remaining 50 000 $$\\\$$ in loan 1 incorrect or correct?

• Check the contract of the actual loans because they are not always the same as the theoretical mathematical model. Feb 7 at 9:47

If you take a loan from now (February $$2022$$) for $$2$$ years until February $$2024$$, it’s the same as taking a first yearly loan from now until February $$2023$$, and then a second yearly loan until February $$2024$$.