I am currently having a disagreement with my colleagues regarding whether a loan is compounding or not.
I have linked below an image of a amortization schedule for a 52 week term for a $50,000 loan. The loan has a weekly interest rate of 0.5%, which is applied each week on the previous week's closing balance.
My colleagues believe that the below loan is NOT a compounding loan. I believe the loan IS compounding, and that it's compounding weekly.
My colleagues believe it's not a compound loan because they believe interest is paid down to zero each week, and the closing balance only moves by the principal amount. For example, looking at the first week, they say the $1,094.34 pays the $250.00 of interest to zero at the end of the week (with the residual going to pay down principal by $844.34), and that therefore no interest carries over to the following week (and if no interest carries over, then it's not a compounding loan).
My arguement is that the principal balance was decreased by the repayment amount, and then subsequently increased by the interest amount, and that therefore the interest balance is reflected in the closing principal (and therefore this interest carries over to the following week where it is compounded).
I strongly believe I am correct here, but am having difficulty in articulating or arguing why. Am I going crazy, and if not, how do I construct an argument to prove that it's a weekly compounding loan?
Edit: Follow up question, if the below loan is NOT compounding, then does that mean I can’t calculate the Effective Interest Rate for the loan =(1+0.5%)^(365/7)? My understanding is that EIR includes compounded interest.
Amortization schedule: