Due to the popularity of lending, all of us, ordinary citizens who have nothing to do with banking, have become no worse than experts in understanding the types and conditions of loans.
Banks offer different interest rates and terms, as well as different conditions: with or without down payment, with or without a pledge of property - we all get to know them carefully, choosing in favor of one or another banking product. But there is one point that few people pay attention to - these are the types of payments when repaying a debt. The amount of the monthly payment depends on this parameter, which is also an important factor, because it will have to be deducted from our income during the entire time of interaction with the bank.
It is worth knowing that there is a choice: annuity or differentiated payments. But are we often given the right to choose? It is infrequent, because the bank is more profitable for those payments in which the borrower is forced to pay more, that is, annuity. We agree, without hesitation, simply because most often we do not understand what annuity payments are. If the conditions of the loan offered by the bank indicate that it is possible to choose the type of payment, then it will not be amiss to take this opportunity and reflect on what is actually more profitable and convenient.
Annuity payments are those in which the amount of your loan payment will be the same throughout its repayment term. With differentiated payments, the amount will monthly decrease.
We will understand what annuity payments are, and why do banks most often offer them? Like any other type of loan payment, this consists of two parts: the main debt and interest accrued on its balance in the amount specified in the terms of the loan agreement. So, as part of your first payments, the amount of debt is a very small part of the principal amount, later it increases. This suggests that the amount of debt decreases very, very slowly, and interest is accrued on it. Therefore, it so often happens that the borrower, not knowing what annuity payments are, and wanting to repay the loan ahead of schedule , suddenly finds for himself that for several months, or even years, he has been giving large amounts of money to the bank every month, and the amount of debt has decreased only slightly . It turns out that this is beneficial for the bank and not at all beneficial for the borrower - after all, you pay interest as if in advance, and if you decide to repay the loan ahead of schedule, trying to save, you will not succeed - the interest for using the loan has already been paid.
Plus annuity payments in their stability. With their help it is easier to plan your budget, knowing exactly what amount of money you will need to lay out every month. This is what annuity payments are.
As is clear from the above, differentiated payments are less convenient for self-calculation, but more economical. In them, part of the main debt is evenly scheduled for the entire loan term, and interest accrued on the balance decreases monthly due to a decrease in debt. First payments may become a big burden on your budget, but in the future, the amount will decrease and even allow you to repay the loan ahead of schedule.