Credit products are popular among the population. Bank offices offer different conditions, but in any case, the potential client will have to return not only the loan amount, but also the accrued interest. On the one hand, it seems that everything is simple. However, not all customers know what the difference is between annuity and differential credit. Moreover, many do not delve into the terms of the contract and do not even know how to make payments. Let's make a difference.
Annuity
A feature of this method of repaying loans is that during the entire loan period, the amount of payments remains unchanged. In fact, this means that the client will repay his own debt in equal amounts of payments, which will include part of the loan, as well as accrued interest.
Like differential credit, annuity carries certain advantages. In particular, they consist in the fact that during the entire period it is necessary to pay the same amount. This saves the client from the need to make additional calculations. Moreover, the borrower can use the auto repayment service, losing the need to deposit funds on a fixed date.
Differential loan
This is an incredibly rare product. Only a few organizations present in the consumer lending market are ready to offer it to their own customers. This is due to the fact that it carries some financial benefits for potential customers, but at the same time reduces the profit of a banking organization.
Differential loan repayment has an important feature. It consists in the fact that with each month the amount of payment will be reduced. Accordingly, the greatest financial burden will fall on the client at the beginning of repayment. However, with each month the credit burden will be reduced. A similar feature is associated with the principles of calculating interest on debt. However, we will talk about the calculations below.
Features
Each banking product has its own characteristics. If you calculate a differential loan, it becomes clear why from month to month the amount of payments varies.
This is due to the fact that you will repay the main debt equally often. And the difference in the amounts will be associated with a change in accrued interest. Indeed, with each next payment your debt will be reduced. Along with it is the amount of accrued interest. The client will have to relentlessly follow the payment schedule or contact the bank. A differentiated loan is constantly changing the amount of payment to be repaid. The client must know exactly how much to deposit.
Credit load
If you have chosen a similar method of calculating interest, then the potential client must be confident in their own financial capabilities. Payments will be impressive. As a rule, in the first months they are twenty percent or more higher than the payments that are assigned under the annuity scheme.
However, gradually the situation will change in favor of the client, and the financial burden will decrease and will be lower than with an annuity loan. That's why differentiated may be preferable for some customers.
Similarities and differences
As you can see, annuity and differential payments have a lot in common. This becomes clear if you delve into the structure of each of them. Both payments include part of the principal, as well as accrued interest. However, there are many differences.
Annuity payments involve repayment of debt by the borrower in equal installments. This allows you to evenly distribute the loan burden for the entire period with the gradual repayment of the main debt, as well as accrued interest. However, this advantage actually turns into a significant disadvantage for the borrower. With an annuity repayment scheme, the overpayment is much larger. This is due to the fact that the repayment of the main debt is incredibly slow, which is beneficial to the banking organization, but not to the debtor.
A differentiated loan payment is more beneficial to the debtor. However, this is well known to banking organizations, so loans on such conditions are extremely rare. In addition, you need to understand that during the initial period of loan repayment, the borrower has an increased load. This is due to the fact that the monthly payment includes a fixed part of the main debt, as well as accrued interest, which will decrease with each next installment.
Be prepared for the fact that the majority of existing banking enterprises will offer you an annuity loan settlement scheme. This is due to the fact that such a scheme promises great profits, and also creates convenience in the calculations. After all, the amount of the monthly payment is unchanged throughout the entire lending period.
What is more profitable?
It is worth noting that differentiated credit is less beneficial to banking organizations than annuity. This is due to the fact that at the beginning of debt repayment, the client makes payments, which for the most part consist of accrued interest. At the same time, the repayment of the main debt is extremely slow. Accordingly, the higher the debt, the more interest you can accrue.
An annuity loan allows the bank to earn more than a differentiated loan. That is why the vast majority of companies present in the consumer lending market offer this repayment method.
What to choose?
Now you know what a differentiated loan payment is and you can give it preference. However, in practice, be prepared for the fact that in most banks you will refuse to issue a loan on such conditions.
Moreover, you should not think that overpayment with such a scheme is always lower. When making a choice, you must first take into account the specific proposal. It is possible that an annuity loan can offer you the most favorable interest rate.
It is equally important to consider your own capabilities. Indeed, not every potential client will be able to master the increased credit burden. That is why you should first read the following paragraph.
How to calculate differential credit?
This is an important issue for potential borrowers who plan to use such a payment scheme for repayments. I must say that the scheme of settlements with differentiated payments is not easy. Let's try to figure it out.
The main feature is that for each next payment you need to re-calculate the amount. After all, it will constantly change. The calculation formula consists of two parts.
The balance of the main debt / Number of periods + The balance of the main debt * Interest rate / 100 * 12
First of all, let's calculate the first part. To do this, you need to know the balance of the debt, as well as the remaining payment period, or rather the number of payments to be made.
Suppose that the remaining debt is 10,000 rubles, which must be paid within ten months. Then the result of the calculations will be 1000.
Then we calculate the second part of the formula, after specifying the data. In this case, you only need the interest rate, since the balance of the main debt is already known to us. The numbers 100 * 12 are present in order to calculate the monthly payment.
So, if the interest rate is conditional ten percent, then it will be easy to make calculations using the second part of the differential loan formula.
10,000 * 18/100 * 12
According to the calculation results, we get 150. This is the size of accrued interest.
It remains only to add up the results of both parts. Add up 1000 and 150. As a result, we find out that the size of the current payment is 1150 rubles. It must be remembered that this amount is variable and the next payment will be slightly lower. However, it will have to be re-calculated.