22.06.2017 0
Today, banks offer many services to the population, the most popular of which are lending and deposits. The policy regarding loans and deposits is largely controlled by the Central Bank of the Russian Federation, as well as Russian legislative acts. However, banks retain the right to provide loans and place deposits under certain conditions, if this does not contradict the law.
According to statistics, every 10th Russian is a client of one bank or another. This is why the question of how annual interest on a loan or bank deposit is calculated is so important. In most cases, interest refers to the size of the bet. The total amount of the overpayment on the loan, as well as the size of the monthly payment, depends on the rate.
Annual percentage of deposits: calculation using the formula
First of all, let's look at bank deposits. The conditions are specified in the agreement at the time of opening a deposit account. Interest is charged on the deposited amount. This is a monetary reward that the bank pays to the depositor for using his money.
The Civil Code of the Russian Federation provides for the opportunity for citizens to withdraw their deposit at any time along with accrued interest.
All nuances, conditions and requirements for the deposit are reflected in the agreement between the bank and the depositor. Annual interest is calculated in two ways:
Annual loan interest: calculation using formula
Today, the demand for loans is huge, but the popularity of a particular loan product depends on the annual interest rate. In turn, the amount of the monthly payment depends on the interest rate.
When considering the issue of calculating interest on a loan, it is necessary to familiarize yourself with the basic definitions and features of lending in Russian banking institutions.
The annual interest rate is sum of money, which the borrower agrees to pay at the end of the year. However, interest is usually calculated on a monthly or daily basis in the case of short-term loans.
No matter how attractive the loan interest rate may seem, it is worth understanding that loans are never issued free of charge. It doesn’t matter what type of loan is taken: mortgage, consumer or car loan, the bank will still be paid an amount greater than what was taken. To calculate your monthly payment amount, divide the annual rate by 12. In some cases, the lender sets a daily interest rate.
Example: a loan was taken out at 20% per annum. How much percentage of the loan amount is required to be paid daily? We count: 20% : 365 = 0,054% .
Before signing a loan agreement, it is recommended to carefully analyze your financial situation, as well as make a forecast for the future. Today, the average rate in Russian banks is approximately 14%, so overpayments on the loan and monthly payments can be quite large. If the borrower is unable to repay the debt, this will result in penalties, lawsuits and loss of property.
It's also worth knowing that interest rates may vary depending on your condition.:
- constant - the rate does not change and is set for the entire loan repayment period;
- floating depends on many parameters, such as exchange rates, inflation, refinancing rates, etc.;
- multi-level - The main criterion for the rate is the amount of remaining debt.
Having familiarized yourself with the basic concepts, you can proceed to calculating the interest rate on the loan. To do this you need:
- Find out the balance at the time of settlement and the amount of debt. For example, the balance is 3000 rubles.
- Find out the cost of all elements of the loan by taking a statement of the loan account: 30 rubles.
Using the formula, divide 30 by 3000 to get 0.01. - We multiply the resulting value by 100. The result is a rate that regulates monthly payments: 0.01 x 100 = 1%.
To calculate the annual rate, you need to multiply 1% by 12 months: 1 x 12 = 12% per annum. 
Mortgage loans are much more complicated to calculate because... include many variables. For a correct calculation, the loan amount and interest rate will not be enough. It is better to use a calculator that will help you calculate the approximate rate and amount of monthly mortgage payments.
Calculation of annual interest on a loan. Online calculator (balance by month and overpayment amount)
To determine in detail the annual interest on the loan, distribute the balance of the loan by month and year, as well as display information in the form of a graph or table, you can use the online calculator for calculating
Most often, the annual interest rate is used to calculate the cost of a loan or deposit. When you put money on deposit, the bank pays you interest for using it, and when you take out a loan, you pay interest to the bank. That's how this business works. If someone offers you a loan, then you have every reason to doubt the integrity of this lender.
The annual interest rate is...
What is annual interest? We suggest starting with a definition:
Annual interest rate- this is a certain percentage of the loan (deposit) amount that the borrower (bank) pays for using the loan (deposit) for one year.
For example, if the annual interest rate is 20% , then the annual fee for using the amount in 100,000 rubles will be equal 20,000 rubles(100,000*20%=20,000). This definition can also be formulated as follows:
Annual interest on loan (deposit)– this is a remuneration expressed as a percentage per annum of the loan (deposit) amount that the bank (depositor) receives for the loan issued (deposit placed).
Pay attention to one important point:
The annual percentage shows the fee (remuneration) for using a loan (deposit) only for a year.
That is, if you take out a loan 100,000 rubles for one year under 20% per annum, then yes - you will pay for a year of using it 20,000 rubles, and if for three years, then multiply this figure by three and you get - 60,000 rubles (100 000*20%*3=60 000).
It’s just that some borrowers mistakenly perceive the annual interest rate as a calculated indicator of the total overpayment on the loan for the entire period. Such a borrower looks at the figure of 20% per annum and thinks: “Great! Now I’ll take out 100,000 rubles on credit for three years, and gradually return 120,000 rubles to the bank!”
Yeah! Now! You'll return it! You will then look at the payment schedule with a stupid smile and wonder: “Well, why 160,000, and not 120,000, as I estimated?”
The situation is similar for deposits. If you deposit 100,000 rubles at 15% per annum, then 15,000 rubles is the amount of remuneration that the bank will pay you for using this money for only one year.
It is clear that in addition to the remuneration, the borrower (bank) is obliged to promptly repay the loan (deposit) amount itself.
In general, be careful, friends, when dealing with annual interest.
By the way, in practice, on a long-term loan received from a bank for 100,000 rubles at 20% per annum, in one year it most often “accumulates” not 20,000, but much less. Why is this happening? The reason is the constantly changing base on which interest is calculated. We will consider this topic.
The interest rate on a loan is the bank’s income expressed as a percentage of the loan amount (loan body) that it issues for use to the client. Simply put, this is your payment to the bank for the opportunity to use its money. PS is usually calculated in annual percentages. For example, if you take out a loan from a bank for 10,000 rubles at 15% per annum, then you will pay 1,500 rubles per year for using the loan. By the way, do not confuse the concepts of interest rate and the total overpayment on the loan, which, except for the first, includes all bank commissions, fees and other charges for using the loan and other services.
There are several types of interest rates. We will not delve into the jungle of economics, but will consider only the main ones that are of interest to the common man. So, the interest rate can be fixed or floating. The difference is obvious from the names: the first is clearly fixed in the contract and is not subject to change until its end, while the second during the loan repayment period can change depending on fluctuations in various indicators, for example, the level of inflation in the country.
What is the effective interest rate on a loan?
At their core, the concepts of “effective interest rate on a loan” and “full cost of a loan” are identical. The only difference is that the second term began to be used relatively recently, since 2008, when the Central Bank of Russia obliged all banking institutions familiarize borrowers with the full cost of the loan in order to avoid using client ignorance for personal gain. Before this, banks massively sinned with hidden commissions and other payments, which became an unpleasant surprise for the borrower after the fact of signing the contract. The effective interest rate is expressed in annual percentages and includes all mandatory payments provided for in the loan agreement or by law.
What is a marketing loan rate?
This type of bet can most often be found in car dealerships. The tempting 0% they promise you has nothing to do with the interest rate on a bank loan. The essence of the marketing rate is that it implies a discount on the product in the amount of the interest that you would, in theory, have to pay to the bank. The dealer's purchase and sale agreement and the loan agreement with the bank will specify the cost of the car taking into account this discount, and it will be the bank interest that will be charged on it, which in this case is slightly lower than usual (10-12% versus the average 14-16%).
If the marketing rate on the loan is not zero, then the discount will be provided for the amount of the difference between the marketing and bank rates. The dealer reimburses this difference to the bank according to their agreements. The bank that replenishes its loan portfolio, the dealer who increases sales, and the buyer who purchases a car at a reduced price, all benefit. We still recommend that the latter carefully read the contract and calculate his financial capabilities, since all kinds of hidden commissions are possible. By the way, such an offer does not relieve the buyer from the costs of obtaining insurance, and they are characterized by high interest rates.
By the way, we are giving a tip to those who are planning to buy a car and have all the necessary amount on hand. Even if you don’t need a loan, you can use this scheme to get an impressive discount on a car, and repay the loan ahead of schedule in a month. You just need to carefully read the contract and carefully calculate the final benefit, including expensive insurance and the presence (absence) of a penalty for early repayment.
Why are there high loan rates in Russia?
The coveted 4-5% per annum on a loan still remains the exclusive prerogative of foreign banks; our Russian borrowers only dream of such interest and will probably dream of it for a very long time. What is the problem with such high rates on domestic loans?
Inflation
It is quite high in Russia, 7-8% versus European or American 3-4% per year. For this reason, the interest rate on loans cannot be less than or equal to the inflation percentage, otherwise banks simply will not receive their profit, and they will definitely not work at a loss. Why is inflation so high? It is mainly associated with the high level of wear and tear of industrial assets, especially in the oil and gas industry. Enormous profits are not allocated on time to modernize production, which leads to even greater wear and tear of equipment; its upgrade is usually carried out due to the constant increase in product prices. As a result, gasoline becomes more expensive, followed by transportation, and, logically, all products that require transportation, and this is practically everything for us.
Fires and floods also play a significant role in rising prices. This is where high inflation comes from. In these realities, banks are simply obliged to insure themselves by adding another 2-3% to the inflation rate on loan rates. But rates of 10-11% per annum obtained through simple calculations cannot be found in Russian banks either. What is the reason?
Risks of non-returns
Banks initially factor in the risk of non-repayment of loans into the interest rate on loans, which is another 2-3% per annum. It turns out that the bank is more concerned about issuing loans left and right at high interest rates, without particularly bothering with the solvency of clients. It turns out that respectable payers (of which the majority are still the majority) pay out of their pockets the debts of malicious violators of loan agreements. Here you can complain about the low financial literacy the population, which often “cannot meet” its payment obligations, and the bank’s thoughtless advertising of credit products, which promotes a heavenly life without much effort. As a result, half of the population is “in debt like silk,” and the other half is afraid of loans like hell.
When issuing a loan, the bank informs the client about the interest rate for using the loan. Often, trying to attract customers, credit institutions declare an attractive interest rate for using a loan, but not all borrowers pay attention to additional fees and payments to the bank, which significantly increase its cost. At the same time, credit institutions receive their financial benefit from these fees.
According to the adopted Directive of the Central Bank of Russia No. 2008-U, banks are required to indicate in the agreement the full cost of the loan, including payments in their favor made by the borrower once. This document states that when calculating the full cost of the loan, the credit institution is obliged to inform the borrower about all types of payments that he will have to pay in its favor, including indicating the calculation of the following operations:
Repayment of the principal amount of the loan;
- repayment of interest for using the loan;
- payment of the commission amount for execution of the contract;
- payment of a commission for issuing a loan;
- commissions for opening an account and maintaining it;
- commissions for settlement and cash services, for servicing credit card.
Also included in the full cost of the loan are mandatory payments to insurance companies, fees for the services of notaries and lawyers when drawing up various necessary documents for pledging the property pledged as collateral for the loan.
The total cost of the loan does not include insurance payments OSAGO, fees for obtaining and repaying a loan in cash, including payments through ATMs (sometimes these percentages can reach 3-5% of the total amount). The possible payment of a fine for a late payment on a loan, for blocking a card, withholding a commission for crediting funds to a credit card by third-party credit organizations, etc. is also not taken into account.
Concept of effective interest rate and opportunity cost
All of the above payments significantly increase the cost of the loan for the borrower. However, in conditions of fierce competition in the lending market, in an effort to attract customers, banks in most cases refuse to charge most commissions, but even in this case, the cost of the loan will be higher than stated in the agreement. This is due to the fact that there is a concept of effective interest rate and compound interest. In this case, the calculation of the total cost of the loan takes into account the amount of lost profit of the borrower, which he could have extracted from his finances if he had not paid interest on the loan with it, but deposited it on an interest-bearing deposit.
To find out the full amount of the loan cost, the borrower must carefully read the document under which he will sign before signing the agreement.
The loan price is the main criterion for a borrower to select a loan offer. This is the monetary expression of the fee for using borrowed money, which reflects the amount of overpayment for the loan.
What does the loan price depend on?
The price of a loan is closely related to the principle of remuneration of credit relations, because The bank receives income when issuing a loan. The loan rate is determined as the ratio of the bank's income for issuing a loan to the loan amount. For example, with a loan amount of 100 thousand rubles. and the loan price is 25 thousand rubles. the annual rate will be 25%.
The price of the loan is directly determined by the level of the interest rate. The latter is formed under the influence of the relationship between supply and demand various types loan. It depends on a number of factors:
Dynamics of attracting household deposits, as well as the average interest rate on deposits;
Economic situation in the country (inflation rate, etc.) - the loan rate must cover the inflation rate;
Credit policy of the Central Bank of the Russian Federation, the refinancing rate at which the Central Bank of the Russian Federation lends to other banks;
Average interest rate on the interbank lending market;
The structure of the bank's assets, the greater the share of attracted funds, the more expensive the loan;
The level of competition in the market, which affects the demand for loans from borrowers; the less it is, the cheaper the loan;
Duration and type of loan;
The degree of risk of the loan - unsecured loans without guarantors have a higher degree of risk and are issued at a higher interest rate.
How the real price of a loan is formed
It would seem that calculating the real price of a loan, knowing the annual interest rate and the loan term, is quite simple. But in this case there are pitfalls, and the actual price of the loan can be several times higher than the fixed interest rate.
Loan payments are made up of payments for repayment of the principal debt, interest on the loan, and commissions. The latter are often hidden from the eyes of users at the stage of concluding a contract. These may include fees for processing and issuing a loan, for opening and maintaining an account, and for its maintenance.
Some banks charge an additional fee for cash withdrawals (usually when using credit cards).
The agreement may also establish payments to third parties at the expense of the borrower. As a rule, this applies to mortgage loans that require payment for the services of appraisers, insurers, notaries, etc., or car loans (payment of CASCO). All this can lead to the fact that the rate of 20% per year, taking into account all commissions, can turn into 50%.
Separately, fines and penalties for late monthly payments can be included in the cost of the loan. They are individual for each bank.
Recently in Russian law laws have appeared that protect borrowers from hidden fees and interest. The bank is obliged to inform the borrower about all types and terms of loan payments.
Yes, according to Russian legislation, banks must notify the borrower of the total cost of the loan (FLC), which is expressed as a percentage. It must include all payments established by the contract. Also courts
Good afternoon I was in my student years summer holidays worked as a promoter at various events.
Back then, such activities were just gaining momentum, not like they are now.
Accordingly, there was not much work, most of I had to just stand for a while, which was pretty boring.
To keep myself busy, I developed the habit of calculating the annual interest rate on a loan.
Useful practice, and time passed faster. You can learn how to calculate the annual interest on a loan from the next post.
There is such a percentage value as the total cost of the loan (or, the effective rate). There is also a percentage of overpayment on the loan. Do not confuse these concepts, these are different quantities!
The effective interest rate (the full cost of the loan) is of the same nature as the dictated loan rate itself.
Just for the convenience of comparison and evaluation, all other possible commissions and fees of the bank are already “built into it”, i.e. all payments are brought to the “canonical” form, in the form of annual interest.
Let me remind you that the classic interest rate on a loan is ANNUAL interest, which is classified as COMPOUND interest.
The difference between compound interest and simple interest is that the former are accrued each time on the accrued amount, taking into account the previous accrual, and simple interest is always accrued on the original base.
And when the task is to calculate interest on a loan, then, as a rule, this is precisely this value. And it differs from the relative percentage of the annual overpayment (loan amount/loan payment amount as a percentage).
- Firstly, interest is calculated every new month FOR THE BALANCE OF THE DEBT, AND
- secondly, the calculation occurs according to the principle of annuities (i.e. those same compound interest takes place).
Now that working with Excel formulas in terms of calculating interest on a loan is clear, let’s look at a clear example:
Loan in the amount of $10,000, for a period of 1 year. It is known that the total monthly loan payment is $926.35.
Then we calculate the annual interest on the loan using the Excel formula:
RATE(12;-926.35;10000)*12 = 20%
In this case, this is an effective rate, because the total monthly payment was considered.
Now the overpayment: for 12 months the borrower will pay 926.35 * 12 = 11116.2 dollars. This means the overpayment for this 1 year: 11116.2 - 10000 = 1116.2 dollars. But this is only 11.16% of the loan amount!
Now let's change the conditions a little. Consider a loan of $10,000 for a period of 3 years. And we know that the total monthly payment is $371.64.
Then the total annual interest on the loan:
RATE(36;-371.64;10000)*12 = 20%
Same amount, I just extended the term and reduced the monthly payment accordingly so that everything would come together.
However, the picture of overpayments is naturally changing. For 3 years of total payments: 371.64 * 36 = 13379 dollars. Overpayment: 13379 - 10000 = 3379 dollars. This is already 33.79% of the loan amount.
Advice!
Thus, when the question is how to calculate interest on a loan, it is most convenient to use not the relative percentage of overpayments, but rather the value of the annual effective rate (the total cost of the loan).
source: http://creditsecrets.ru
How to calculate the annual interest on a loan
There are situations when a loan becomes the only way out of the situation or when you want to buy something right away, avoiding long-term savings. You can buy almost anything on credit.
Many who have ever taken out a loan are interested in the question of how to calculate the annual interest on a loan independently. It's not difficult at all. Let's look at how to calculate the annual interest on a loan step by step:
- First, read the agreement and clarify the amount you borrowed. Write it down on a separate piece of paper. Then find the final amount (with interest) that you will return to the bank at the end of the term. Write her out too.
- Find the delivery date in the contract. It can be found both in the contract itself and in the payment schedule. To calculate the annual interest on the loan from the total amount with interest, subtract the amount that was originally issued.
- Now the resulting value must be divided by the loan term and multiplied by 100%. This way you can find out the annual interest rate on the loan.
- You need to add up all your monthly loan payments. These can be found in the payment schedule. To make it more convenient, you can create an Excel spreadsheet.
- To the resulting amount you need to add a commission if you paid it (commission for processing, processing or receiving funds).
- If you took out a loan on a card, you also need to add the interest for the annual service to the amount. The amount received must be multiplied by the interest rate specified in the loan agreement.
- The result must be divided by the loan term and then multiplied by 100%. The higher interest received means the “effective” interest rate under the loan agreement. This percentage is what the bank requires for the use of its funds.
When applying for a loan, many banks require compulsory insurance. The contract will indicate the amount or percentage for its payment.
Many payment schedules list the APR and full interest rate. When drawing up a contract, carefully study these figures, and also pay attention to commissions and additional fees.
source: bankingtips.ru
How to calculate annual interest?
Bank clients who want to take out a loan or make a deposit are faced with the concept of annual interest:
- in the first case, the interest is the amount that the client pays to the bank for the use of his funds
- and in the second, on the contrary, the amount that the bank pays to the client as a reward.
Regardless of which bank product you decide to use, it is advisable to know how to calculate annual interest.
How to calculate annual interest on a deposit?
Interest is calculated on the deposit in two ways: with and without capitalization. Interest on a deposit without capitalization, that is, when the amount is credited to the client’s account and paid to him within the terms specified in the agreement, is calculated according to the formula:
S= (P * I * t / K)/100%, where
P– deposit amount;
I– annual percentage;
t– the number of days during which interest accrues; usually this figure is equal to half the total term;
K– number of days in a year.
For example, a deposit of 200,000 rubles was made for a period of 1 year with an interest rate of 10% per annum. Then the annual interest will be:
S = (200,000 * 10 * 184/ 365)/100% = 10,082 rubles.
A deposit with capitalization involves adding interest to the principal amount. For calculation use the formula:
S = (P * I * j / K)/100, where
P – deposit amount;
I – annual percentage;
j – number of days to which capitalization applies;
K – number of days in a year.
This formula calculates how much the deposit amount will increase after a month. For example, with a deposit of 200 rubles with 10% per annum, this amount will be equal to:
S = (200,000 * 10 * 30/ 365)/100% = 1644 rubles.
Next month, the resulting figure should be added to the deposit, and interest should be calculated based on the amount received.
How to calculate annual interest on a loan?
- From the amount with interest, you need to subtract the money that was borrowed, and divide the resulting number by the number of years of lending. Now the resulting figure is multiplied by 100% to get the annual percentage.
- It is necessary to add up all the amounts of monthly payments, add all additional payments (card maintenance, commissions and fees, if any), and then multiply the result by the interest on the loan.
The resulting value must be divided by the number of years for which the loan was issued and multiplied by 100%.
source: http://creditovgrad.ru
Step by step instructions
Take a piece of paper and write down the following information on it: the amount of money you borrowed, the amount plus interest that you will need to pay to the bank and the period for which you took out the loan.
Attention!
All this data must be viewed in the loan agreement.
Then divide the resulting value by the term of the loan (in years) and multiply by 100%. The resulting number will be the annual interest rate.
You can calculate the annual interest rate on a loan in another way. To do this, add up all the monthly payment amounts according to the schedule. Then add to the result the amount of the commission, if you paid it.
Warning!
In addition, if the loan was issued to you in the form of a credit card, add the annual maintenance amount for this card.
You will get the value of the “effective” interest rate, that is, the one you will pay to the credit institution for using the funds.
If you signed up for an insurance service when applying for a loan, you will also need to pay a certain percentage for it. Therefore, carefully study the loan agreement, especially the information written in small print.
In addition, if you paid a commission to the bank when applying for a loan, you can return it both after paying the full amount of the debt, and immediately after receiving the money.
To do this, write a request for a refund in free form.
Advice!
If the bank refuses to satisfy your claim, you have the right to go to court, but, as a rule, banks do not take the matter to court and return the money.
source: kakprosto.ru
Is it possible to check the accuracy of the calculations yourself?
The final overpayment turns out to be too unexpectedly large.
And the annual interest rate as a result of a multi-story building or a three-story house never corresponds to that specified in the loan agreement.
I understand such borrowers very well, because I also consider myself to be in the category of distrustful consumers trying to “keep their finger on the pulse.”
Having taken out a mortgage for my apartment, from the very first day I set up a sign at home calculating the annual interest rate right on my computer desktop.
Every month I enter new data there, taking into account early repayments, and from time to time I check the results with bank statements. I don't know what my loan officer thinks of me, but I honestly don't care.
Attention!
In more than three years, I twice found an error in bank calculations. So I don’t consider the question about formulas and calculations for a loan at home to be naive and stupid at all.
Let's use a specific example to try to make all the necessary calculations and enter the results into the table for calculating the annual interest rate on a loan.
Let's consider the two most popular loan repayment schemes: classic and annuity. I chose easy numbers to avoid unnecessary complication - the main thing is to understand the essence of the calculations.
Initial data:
- Loan amount – $1200;
- The loan term is 12 months (we will assume that each month has an equal number of days, although banks charge interest for each day the loan is used. Accordingly, the payment for February will always be less than for July).
- The interest rate is 12% per annum, that is, 1% per month;
- Repayment scheme – differentiated payments.
Our payment consists of two parts:
- equal part in each month (“body” of the loan): Body of the loan = Loan amount/Number of months. In our case it will be exactly $100.
- interest accrued on the outstanding balance. Monthly interest = loan balance * monthly interest rate
I present all calculations without mathematical formulas so that the essence of the calculations is clear.
For clarity, let's summarize all the calculations in a table. By the way, such a table can be created in Excel, and each time the results will be recalculated taking into account data adjustments.
I will write out the calculations of the obtained values in the first months directly in the table, so as not to display them separately. All other numbers are calculated exactly according to the same principle.
Warning!
From the table we see that the maximum financial burden falls on the borrower in the first month of loan repayment with a gradual decrease towards the end of the loan term.
The example is conditional, therefore it does not accurately reflect the real state of affairs. If a loan is issued for 100 thousand rubles for 20 years, the monthly interest will be several times higher than the value of the “body” of the loan!
Now let’s calculate the real annual interest rate on our conditional loan. To do this, it is enough to divide our overpayment ($78) by the original loan amount ($1200). 781200 = 6.5%.
As you can see, 6.5% is almost two times less than the 12% initially announced by the bank. And this does not take into account early repayment, which will further reduce the real interest rate.
However, the bad news is that in our conditional example only one year is considered.
Multiply even the rate reduced by three times by thirty years - and you will get a final overpayment of more than 100%.
Now let’s look at the annuity loan repayment scheme. Despite its simplicity for the borrower (the same amount is deposited into the bank's cash desk every month), the calculation formula in this case will be more complicated than in the previous case.
It will not be possible to explain it “on your fingers”, so you will have to give the formula itself. This is how the same monthly payment is calculated, from which all other calculations are based.
Monthly Payment = Initial Loan * %mo / Note that these calculations use the monthly interest rate, not the annual interest rate. In our example – 12% per annum / 12 = 1%.
Now we substitute specific numbers into the formula and get the following:
Monthly payment = 1200 * 0.01 / = $106.62 Now let’s see what the table of payments and the final overpayment on the loan will look like.
Advice!
Unlike the previous scheme, this table first calculates the monthly total payment, then the due interest, and what is left goes to repay the principal debt to the bank.
Please note the features of the annuity payment:
- the first monthly payments on it will be less than in classic scheme
- closer to the middle of the term (seventh month) payments will be more or less equal
- but at the end of the repayment period the annuity payment will be much greater than the differentiated one
In other words, it is easier to pay under the annuity scheme in the first years of lending, but after a few years of payments, their size does not become smaller - every month the same amount as at the beginning.
Believe me, after five years of paying off your mortgage, it gets really stressful. In the classic scheme, a small but constant relief is felt after the second year of payments.
Now pay attention to the overpayment. In the annuity scheme it is already $79.2, which is $1.2 more than in the previous version. In our conditional example, this difference is not noticeable at all due to the tiny amounts, rates and terms.
Attention!
But on serious mortgage loans it is, in fact, hundreds of dollars. Let me remind you again. The annuity scheme ALWAYS costs the borrower more than the classic one!
But let's return to our example. The real interest rate under our annuity scheme will be: 79.2%/1200 = 6.6% instead of the stated 12% in the loan agreement.
Enter your initial data: annual interest rate, loan term and loan amount, select a repayment scheme, and, if desired, enter all additional commissions and fees.
And after a couple of seconds you get visual tables and graphs on the monitor. But I still prefer to know what algorithm these convenient and visual calculators use to make their calculations. So, just in case...
