The boom of consumer and mortgage lendingForces borrowers to master the ABC of financial calculations. It is clear to all that the issuance of loans by banks - both to enterprises and individuals - is not charity at all.
Therefore, it is important for borrowers to reduce the burden by reducing the amount of interest payments.
But most often the applied annuity method of payments is more profitable for banks.
Loan repayment schemes
There are two schemes for repaying a loan:Differentiated and annuity monthly payments. They differ in the amount of payments. With a differentiated repayment, you pay different amounts every month, at the beginning these amounts are larger, by the end of the maturity they become smaller. Annuity payments are always paid the same amount.
The calculation of a differentiated payment is simple - totalThe amount of the loan is divided by the number of months - the term of the loan, and to these payments, repayment of the loan amount adds monthly interest to its balance. The longer you repay the loan, the less is the balance of your debt, the less and you accrue interest on it.
The formula for calculating the monthlyAn annuity payment, more difficult. Under such a scheme, interest is also charged on the balance of the debt, but the principal debt is not paid in equal shares. It turns out that at the beginning of the loan period, the amount of the monthly payment is mostly interest, in the smaller - payments on the principal debt. The ratio between them changes every month towards an increase in the amount of the principal debt, but the total monthly amount paid remains unchanged.
Pros and cons of annuity payments
According to this scheme, it turns out that the borrowerPays the bank interest forward, i.e. The bank first withdraws its income from the amount of monthly payments, and then this amount is already sent to repay the principal. An annuity loan repayment scheme is more profitable than a differentiated bank. For you, this method is especially disadvantageous if you want to repay the loan ahead of schedule, in which case the actual interest will be much higher than what is specified in your loan agreement. In addition, some banks may refuse to recalculate the monthly amount paid in case of partial early repayment.
To the pluses of the annuity loan repayment scheme forBorrower can be attributed convenience of calculation - you know exactly what amount you have monthly leaves for it and you are much easier to control the payment process. Since the first payments with a differentiated loan repayment can represent quite significant amounts, not all borrowers will be able to allocate them from their monthly income. But inflation processes are also an objective reality, therefore, annuity payments are more beneficial for long-term loans, if you, for example, take money for mortgages for a period of 10 years or more.