Not everyone knows about the concept of annuitypayments That this type of payment, probably, was heard by many. But what influence it has on the value of funds borrowed from a financial institution is not known to everyone. When a person takes a loan, he pays attention to interest. People think that the lower the rate, the better the offer. So think those ordinary people who know little about finance. They also pay attention to the amount of the loan and its term. These are, of course, essential characteristics. But there is an important indicator, not everyone has heard about it.
Types of loan payments
A trained borrower knows what to watch.on such a section as a type of payment. That he has a great influence on the cost of the loan. There are several payment options. Differentiated and annuity payments. What it is? Let's see.
Differential Payments
The first type is the most famous.These are payments for which a different monthly payment is established, which decreases with time. The entire debt is divided by the number of months of the loan, payments must be made in equal shares. Interest is charged on the balance, the amount of payments will decrease monthly.
Now let's consider annuity payments -what kind of payment is this, not all bank customers understand. Outwardly, they seem simpler. What is their essence? The loan must be repaid monthly for one amount, but it is not so easy to count. Many are frightened by the concept of annuity payments. What is this type of payment, it is easier to understand, having understood the calculation mechanism. Interest should be recalculated, taking into account the balance of borrowed funds, they are decreasing, but the share of the principal is growing monthly. Initially, interest is paid, it turns out that banks take income in advance. If we compare these payments with differentiated payments, then we can say the size of the annuity is smaller in the first months. Somewhere in the middle of the term they are about equal, and then the value of the first will decrease, and the amount of the second will not change.
How can you calculate annuity payments
Banks are used to calculate specializedprogram calculators. If you do not go into the subtleties of mathematics, it can be noted that a loan with such a payment turns out to be more expensive, since the balance of the debt decreases more slowly. The longer the loan term and its value, the higher the overpayment. The method of repayment is not so important with loans for short periods.
Monthly payment = KA * SK, where KA is the annuity coefficient, SK is the loan amount.
KA = (pr * (1 + pr)Mr.) / ((1 + pr)Mr.-1), where pr is the interest rate (monthly), n is the loan repayment periods.
For example, if the rate is 12% per year, then to calculate pr it is necessary to divide 12% into 12 months.
Cons annuity:
- appreciation of the loan;
- it is impossible to recalculate the monthly payment in case of early repayment;
- sometimes it is not allowed to repay a loan ahead of schedule.
Annuity loan payments have not only disadvantages, they have a number of advantages.
- No need to specify the amount of payment every month, the main thing is to repay the debt in time.
- Initial payments are less, it allows you to take a loan to people with low income.
- Low monthly payments are beneficial for family budgets. Often they are chosen for a mortgage.
- Due to inflation, this type of payment does not seem so expensive.
Calculate everything carefully and analyze when taking a loan so that there will be no surprises!
