The popularity of loans among the population is not in doubt. Loans are taken for different purposes. Someone acquires real estate, someone - a vehicle. There are also those who borrow the latest model of iPhone with borrowed funds and pay a loan for it for a long time. However, it is not about the purpose of obtaining a loan, but about the methods of paying it. Not all customers, receiving a schedule of monthly payments, are interested in what types of loan payments exist. Does the bank offer a differentiated or other repayment method? Let's try to improve financial literacy by understanding these issues.
Description
A differentiated loan payment is a method of repaying a loan in which the borrower pays the bulk of the debt in equal installments over the entire period of the loan. In this case, interest is accrued only on the balance of the debt, therefore, with this method of payment, you can observe a monthly reduction in payments. Some features follow from this definition, which we will discuss below.
Features
Knowing what a differentiated loan payment is, you can guess that the first payment will be the largest for the entire period. Starting from the second month, the amount of payments will begin to decline.
That is why the borrower choosing this method of debt repayment needs to calculate his own budget in detail, laying a certain reserve of funds. If this is not done, large loan payments may seem overwhelming.
However, they will gradually decline, reducing the burden of a cash loan. This has certain advantages. Indeed, as a result, thanks to this approach, it is possible to reduce the total amount of overpayments on the loan in case of early repayment.
Relevance
For the above reason, banks rarely offer loan repayments in differential payments. This is due to the fact that this method of repaying a loan reduces their income. Such conditions are sometimes offered to mortgage borrowers and much less often to those customers who apply for a consumer loan. The general rule is that differentiated loan payments at the bank can be received by borrowers by choosing a long repayment period.
You need to understand that it is rarely possible to find a bank that agrees to differentiated payments. Such a scheme is disadvantageous to the lending institution itself. After all, his main goal is to profit as much as possible. Knowing what a differentiated loan payment is, you should understand that this method of repaying a loan conflicts with the purpose of the bank itself. For the same reason, a similar method of settlements can be provided to customers who take a loan for a long period.
Calculation Procedure
This item will be interesting to the most fastidious readers. The calculation of differentiable loan payments is relatively simple.
So, first of all, the total amount of debt should be divided into equal parts depending on the period for which the loan was issued. Accordingly, if a loan is provided to a client for three years, the total amount should be divided by thirty-six. This is the number of months during which payments will have to be made regularly to pay the debt to the bank.
You need to understand that each payment consists of interest and the amount partially covering the main debt. Therefore, accrued interest on the loan balance will also be added to the amount received earlier. Gradually, the remaining loan amount will decrease, therefore, with a differentiated payment every month, its size will decrease.
This means that at the very beginning of payments, the client will have to bear a large financial burden, which will gradually decrease. Accordingly, payments will decrease every month, causing a smaller blow to the borrower's budget.
For preliminary calculation of differentiated loan payments, you can use a special calculator. An interesting fact is that you should not completely trust the calculators on the websites of the banks themselves. Often the information in them differs from the actual conditions that offer customers.
Alternative option
Most Russian banks provide their customers with an exclusively annuity method of repaying a loan. In this case, throughout the entire loan period, customers pay the bank the same amount every month. That is, in the first and in the tenth month, he will pay the same conditional thousand rubles.
Now you know what a differentiated loan payment is, and you understand that with this form of payment each month, the amounts that the client pays to pay off his own debt are different.
It may seem that an annuity payment is more convenient. After all, it’s enough to remember the necessary amount only once and not be mistaken in the future by making another payment. In addition, with fixed payments it is easier to calculate your own budget, laying in it the same amount to pay off debts every month.
However, if you approach the issue rationally and clearly know what a differentiated loan payment is, you can come to the conclusion that this method is more rational. Because in this case, the client gets the opportunity to reduce their own overpayments.
Payment Terms
With differentiated loan repayments, the monthly amount of payments is gradually reduced, leaving more and more free funds in the borrower's budget. Particularly noticeable is the reduction in the burden of paying a long-term loan. The amount of monthly contributions to the bank over time is reduced by about half. Agree, the difference is palpable.
Due to the uniform repayment of the main debt, it is possible to reduce the total amount of overpayment. After all, the bank recounts interest on a monthly basis depending on the amount of outstanding debt. Accordingly, the lower it is, the more interest is reduced that you have to pay in favor of the bank for using the funds.
Those who pay the mortgage in differentiated payments manage to reduce the amount of annual insurance, which is compulsory if the property is pledged. This is due to the fact that the amount of insurance coverage is calculated depending on the amount of outstanding debt.
Total
If you plan to get a loan with differentiated payments, calculate your own expenses. The calculator on the bank's website may not provide the most reliable calculations. However, taking into account commissions and insurance, the amount may be slightly different. In addition, banks also know how to count and are well aware that with a differentiated method of repaying a loan, their profits will noticeably decrease. That is why not every lending institution is ready to provide its customers with such conditions.