When taking out any loan from a bank, the borrower must clearly understand how interest is calculated on the loan taken, and how much he will ultimately have to overpay.
Loan interest: basic terms and concepts
In order to understand the mechanism for calculating interest payments on a loan, you need to know several terms and concepts.
- The loan term is a temporary expression of the validity of the loan agreement. As a rule, a distinction is made between the planned and actual period (of using borrowed funds). The first of them depends on the lending program and is prescribed in the agreement between the bank and the borrower. The actual term depends on how quickly the borrower repays the loan. In loans without the possibility of early repayment, the planned and actual loan terms coincide.
- Interest rate – borrowed funds. Expressed as a percentage on an annualized basis.
- Accrued interest is the amount of payment for using the loan. With rare exceptions, they are calculated monthly.
- The minimum monthly payment is the amount of funds established by the bank that must be paid by the borrower on the loan.
How do banks charge interest on a loan (annuity and differentiated scheme)
Banks use two standard schemes.
- Differentiated - a repayment system in which monthly interest is accrued on the balance of the debt. It is defined as the difference between the loan amount and the payments made on its body. In simple words, the entire loan amount is divided in equal parts by the number of months of the entire term. The monthly payment is equal to the amount of repayment of the loan body and interest accrued on the outstanding balance. Thus, with this scheme, the monthly payment will always decrease.
- Annuity – more a complex system interest accrual. With it, the loan body and accrued interest payments are calculated in such a way that the amount of the monthly payment during the entire loan period is the same.
Examples for calculating interest
The client took out a loan of 100 thousand rubles. for 10 months at 12% per annum, the interest calculation scheme is differentiated. Then the monthly payment on the loan will be 100 thousand/10 = 10 thousand rubles.
In the first month, the client will pay 10 thousand + 100 thousand * 12%/12 = 11 thousand rubles, and in the second - 10 thousand + (100 thousand - 10 thousand) * 12%/12 = 10.9 thousand rubles and so on until the last month.
After the trial, is interest charged on the loan?
- For example, a court decision determines the amount that the borrower owes to the bank. He will pay it within a certain period. IN in this case A financial institution cannot charge interest on such a debt.
- If the debt (including fines and penalties) is restructured and divided over a certain period of time, then bankers can charge interest on the remaining amount.
Can collectors charge interest on a loan?
Collectors can charge interest on a loan only if the bank has assigned the debt to them. However, the interest rate on this debt should not exceed that specified in the loan agreement.
"How to calculate a loan yourself?" is a question that worries many who want to borrow money from a bank and pay less for it. There are many options for loan calculators on the Internet. With their help, even a child can calculate his or her loan. But what about commissions and insurance? How to choose a loan if the terms are within different offers banks do not match?
What to look for when choosing a loan
- Interest rate. This is the main indicator if there are no differences on the points listed below.
- Loan currency. Ruble loans are more expensive than foreign currency loans. But for foreign exchange there is a risk of appreciation.
- Term. Within one loan offer, the bank's rate varies depending on the term.
- Additional payments or lack thereof. This may include various commissions, fines, payment for collateral assessment, and insurance.
- Availability of a salary card. Banks often offer preferential conditions for salary clients.
- Target. There are targeted and non-targeted lending programs. Their conditions are different. Separately, banks post offers for cards. Card loans are more expensive.
- Security. Secured loans are issued at a lower interest rate.
- Amount and proof of income.
The amount of income allows you to determine the credit limit. This is the maximum amount you can count on. Confirming income with documents allows you to reduce the transaction price. The most expensive loan is the one where information about income is indicated according to the borrower.
- Loan repayment method: in equal parts or not.
Two options for repaying debt – which to choose?
1. Differentiated payment option.
To differentiate means to distinguish. Each subsequent loan payment will be less than the previous one. Payment composition:
- principal (what the bank lends). This amount is divided in equal proportions by the number of payments. For example, a loan of 50 thousand rubles. received at a rate of 20% for 2 years, which will amount to 24 payments. In each payment the principal debt is equal to 2,084 rubles. (50,000 divided into 24 payments);
- interest. Since the loan debt decreases with each payment made to the bank, the amount of interest will decrease each time. The first payment will be 833 rubles, the last – 35 rubles.
The total payment amount will decrease in each subsequent period (month) due to the interest portion. The first payment will be 2,917 rubles, the last – 2,119 rubles.
2. Annuity payment option.
Such payment in each period (month) will be constant. The borrower deposits the same amount into the bank each time. For example, with the same conditions, each contribution to the bank is equal to 2,545 rubles. Payment composition:
- main debt. The amount of loan debt is divided among all payments, but unevenly. The first payment will be 1,711 rubles, then a gradual increase will follow, and the last will be equal to 2,503 rubles.
- interest. Calculate each time from the outstanding balance. In the first payment, their amount will be 833 rubles, then gradually decrease to 42 rubles. in the last.
Since the debt to the bank decreases more slowly than in the previous option, the total amount of interest paid will be greater.
A comparison of the methods is shown in the table.
|
Criterion |
Annuity payment |
Differentiated payment |
|
Amount of each payment |
Same |
Miscellaneous: decreases as debt is paid off |
|
Features of repayment of the principal debt |
Minimum return in the first payments and maximum in the last |
Uniform |
|
Features of interest payment |
Most of it comes from first payments |
The amount of interest in each payment is less than in the previous one due to a decrease in debt to the bank |
|
The total amount of interest paid at equal terms, amounts and rates |
||
|
Amount of the first payment under the terms of the loan |
The main advantage of the differentiated method is its cost-effectiveness. Annuity – the convenience of paying a constant amount. In addition, for long-term loans and large amounts, the size of the first annuity payment is less than the differentiated one. Therefore, it is easier to repay the loan, and it is easier to prove solvency to the bank.
Credit transaction price - what is it?
What is the loan price? This is a payment for the amount of money provided for use. The loan price is considered in several options.
- Interest rate. This is the first thing a borrower pays attention to. But focusing only on the bet, you can make the wrong choice. The loan with the highest interest rate may be the most economical if there are no additional payments.
- The full cost of a consumer loan. Calculated on the basis of Article 6 of Federal Law No. 353 “On consumer credit (loan)”.
The calculation takes into account elements related to the return of funds and debt servicing: interest, issue price and servicing bank card and the cost of insurance (if provided for by the loan program). The full cost of the loan does not take into account: fines and penalties associated with the borrower’s violation of the terms of the agreement, the cost of insuring the collateral, if collateral is provided, and the cost of foreign exchange transactions, if they must be performed to obtain a loan.
- Effective interest rate. Previously, banks calculated it instead of the full cost of the loan. This information is not required to be published at this time. Although it can be used to compare loans.
- Overpayment percentage. The overpayment is everything you have to pay on the loan in addition to the principal amount. These are payments to the bank, appraiser, and insurance company.
The first indicator is not suitable for self-calculation of a loan, the next two are mathematically complex. The last indicator is little known. Although it can be used in calculations even by a non-professional.
How to calculate a loan yourself, without knowledge of financial mathematics
- Study all the features of loan offers and select several of the most suitable options.
- Write down all elements of overpayment for each option. Write out the interest in the form of a rate indicating the method of payment (annuity and differentiated). Other payments should be written out in a fixed amount or as a percentage of the loan amount.
- Make a calculation.
Example. Credit terms:
Amount 100 thousand rubles;
Rate 18%;
Term 1 year.
Let's consider options with and without additional payments.
Option 1. Loan with annuity repayment without additional payments.
Option 2. Loan with annuity repayment. Additional one-time payment – purchase of a credit card worth 500 rubles.
Option 3. Loan with differentiated repayment without additional payments.
Option 4. Loan with differentiated repayment. Additional one-time payment – purchase of a credit card worth 200 rubles. Additional monthly payments – 30 rubles. per month for the cost of the SMS information service on the card.
To calculate, we will use a loan calculator. In this case, the option http://calculator-credit.ru/ was used.
We enter the values for each option one by one and record the results in the table.
|
Payment method |
Annuity |
Annuity |
Differentiated |
Differentiated |
|
Duration, months |
||||
|
Amount, rub. |
||||
|
360 (30 RUR * 12 payments) |
||||
|
9,833 – first payment; 8 458 – last |
9,863 – first payment; 8 488 – last |
|||
Options 1 and 3 without additional payment have the lowest total overpayment: 9,750 and 10,016 rubles. respectively. Of these, option 3 with differentiated payments is preferable.
Options 2 and 4 are less attractive due to additional payments.
The “Total overpayment” indicator can be used to make decisions on loans with equal terms and amounts. What should I do if these conditions differ in the selected options?
How to compare loans of different terms and amounts
|
Duration, months |
||||
|
Amount, rub. |
||||
|
Payment method |
Annuity |
Annuity |
Differentiated |
Differentiated |
|
One-time additional fee, rub. |
400 (card cost) |
1,500 (insurance) |
200 (card cost) |
|
|
Total amount of additional monthly fee, rub. |
50 (cost of SMS notification) |
30 (cost of SMS notification) |
||
|
Overpayment of interest on loan, rub. |
||||
|
Amount of monthly payment (amount of overpayment on interest and additional monthly fee), rub. |
16,380 – first payment; 15,255 – last |
5,917 – first payment; 4 240 – last |
||
|
Total overpayment (amount of monthly payment and one-time additional payment), rub. |
||||
|
Overpayment percentage (annual), % |
The table shows options 5–8. They differ not only in additional fees, but also in basic conditions.
Under option 5, a loan in the amount of 100 thousand rubles. issued for a period of 10 months at 20% per annum. The payment is annuity. The bank transfers the money to the card, the cost of which is 400 rubles. and the monthly fee for the SMS notification service is 50 rubles.
Under option 6, a loan in the amount of 120 thousand rubles. for a period of 1 year at 19%. The payment is annuity. An insurance payment of RUB 1,500 is required.
Option 7: loan in the amount of 90 thousand rubles. for a period of 6 months at 18% per annum. Payment is differentiated. The bank transfers the money to the card, the cost of which is 200 rubles. and the monthly fee for the SMS notification service is 30 rubles.
Option 8: amount 100 thousand rubles, term 2 years, rate 21% - the highest of those presented. Payment is differentiated. There is no additional overpayment other than interest.
In the previous example with equal conditions, preference was given to the option with the smallest total overpayment.
In this case, the smallest overpayment is 5,105 rubles. corresponds to option 7 with the lowest rate of 18%. The largest – in the amount of 21,875 rubles. – option 8 with the highest rate of 21%.
But is it possible to compare options 7 and 8? Only taking into account the term it becomes obvious that paying longer means overpaying more. A loan with a shorter term always wins in terms of overpayment.
But the options cannot be compared even in the case of different amounts. As the loan amount increases, the overpayment on it also increases.
In this case, you can make the final choice using the overpayment percentage. It shows how much you have to overpay as a percentage of the loan amount. To do this, divide the final overpayment by the loan amount and multiply by 100%.
Calculation example for option 5.
10,294 / 100,000 * 100 = 10.29% - this is the percentage of overpayment for the entire period (10 months).
To make the indicator correct for loans different periods, it is led to the option of an annual percentage of overpayment. To do this, divide the resulting number by the loan term in months and multiply by 12 months per year.
10.29% / 10 months * 12 months = 12.35%.
Now the indicator can be compared with other options. Its calculation takes into account all the main differences between loans and all options for overpayment.
As a result, option 8 turned out to be the most economical. Although the interest rate on it and the amount of overpayment were maximum.
conclusions
How to calculate a loan yourself? View all possible options, write out according to them key conditions, including repayment features. Specify the amount of all additional payments. Determine the amount of the final overpayment and the percentage of overpayment.
Allows you to use standard formulas for calculations; the result can be easily checked using a regular calculator and the formulas below. The loan calculator allows you to calculate the amount of payments that need to be paid monthly in order to repay the loan, a favorable interest rate, and also makes it possible to calculate what amount is allocated to repay the main loan and what amount is allocated to repay accrued interest.
Using the loan calculator, you can make two types of payments:
Besides, credit calculator used for comparison different types loans, as well as obtaining the necessary information without the help of bank specialists.
How is differentiated payment calculated?
Differentiated payments decrease as the loan term decreases; they are not equal to each other. Differentiated payment includes two parts:
- Fixed amount , which is intended to pay off the principal debt.
- Descending part , consisting of interest accrued on the remaining loan amount.
Due to the fact that the principal debt is constantly decreasing, the amount of accrued interest, as well as the amount of the monthly payment, is also decreasing. To calculate the amount of the principal debt, the original loan amount must be divided by the number of periods (loan term):
VD = PSK / SK
VD– repayment of the principal debt, PSK– initial loan amount, SK- credit term.
This is the basic formula that can be used to calculate the amount of remaining principal. However, each bank has its own distinctive features when calculating the amount of interest. Among the main approaches, two can be distinguished; their difference lies in the time period. Some banks calculate interest based on the fact that a year consists of twelve months. In this case, monthly interest is determined using the following formula:
SNP = OOD x ASG / 12
SNP OOD– balance of the principal debt, PGS— annual interest rate.
Other banks assume that a year consists of three hundred and sixty-five days. This approach is based on calculating exact interest for the exact number of days of the loan. In this case, the amount of monthly interest is calculated according to the following formula:
SNP = OOD x PGS x KDM / 365
SNP– amount of accrued interest, OOD– balance of the principal debt, PGS KDM– the number of days in a month, which varies from twenty-eight to thirty-one.
Example No. 1. For example, let's give a payment schedule for a loan amount of two thousand conventional units for a period of one year, the monthly repayment is one twelfth of the loan and accrued interest. So, the loan amount is 2000 units, the loan term is 12 months, the interest rate is 20%.
| Payment no. | Loan debt | Interest charges | Principal amount | Next payment amount |
| 1 | 2 000 | 33,33 | 166,67 | 200 |
| 2 | 1833,33 | 30,56 | 166,67 | 197,23 |
| 3 | 1666,33 | 27,77 | 166,67 | 194,44 |
| 4 | 1499,66 | 24,99 | 166,67 | 191,66 |
| 5 | 1332,99 | 22,22 | 166,67 | 188,89 |
| 6 | 1166,32 | 19,43 | 166,67 | 186,1 |
| 7 | 999,65 | 16,66 | 166,67 | 183,33 |
| 8 | 832,98 | 13,88 | 166,67 | 180,55 |
| 9 | 666,31 | 11,11 | 166,67 | 177,78 |
| 10 | 499,64 | 8,33 | 166,67 | 175 |
| 11 | 332,97 | 5,55 | 166,67 | 172,22 |
| 12 | 166,67 | 2,78 | 166,67 | 169,45 |
| Total | 216,61 | 2000 | 2216,61 | |
How are annuity payments calculated?
Annuity payments are payments that are paid in equal installments throughout the entire loan period, i.e. the borrower makes regular payments same sizes. This amount changes by agreement of both parties, or in case of early repayment. The annuity payment also includes two parts:
- Interest accrued for the use of credit funds.
- The amount of the principal debt.
When the loan term decreases, the accrued interest decreases, and the amount of the principal debt, on the contrary, increases. The principal goes down a little slowly at first. The total amount of all interest on the debt is much larger, which is very noticeable when early repayment loan. The first payments cover most of the interest on the loan. The amounts of annuity payments are calculated using the following formula:
RAP PSK PGS– annual interest rate, SK- credit term.
This formula can be called “classical” because it is used in many banks, spreadsheets, and loan calculators.
Example No. 2. As an example, we give a schedule of annuity payments for a loan in the amount of one thousand conventional units for a period of twelve months. So, the loan amount is 1000 units, the loan term is 12 months, the annual interest rate is 20%.
| Payment no. | Loan debt | Interest charges | Principal amount | Next payment amount |
| 1 | 1000 | 75,97 | 16,67 | 92,63 |
| 2 | 924,03 | 77,23 | 15,4 | 92,63 |
| 3 | 846,8 | 78,52 | 14,11 | 92,63 |
| 4 | 768,28 | 79,83 | 12,8 | 92,63 |
| 5 | 688,45 | 81,16 | 11,47 | 92,63 |
| 6 | 607,29 | 82,51 | 10,12 | 92,63 |
| 7 | 524,77 | 83,89 | 8,75 | 92,63 |
| 8 | 440,89 | 85,29 | 7,35 | 92,63 |
| 9 | 355,6 | 86,71 | 5,93 | 92,63 |
| 10 | 268,89 | 88,15 | 4,48 | 92,63 |
| 11 | 180,74 | 89,62 | 3,01 | 92,63 |
| 12 | 91,12 | 91,12 | 1,52 | 92,63 |
| Total | 1000 | 111,61 | 1111,61 |
Other formulas used in calculating annuity payments.
Other organizations use a formula in which the first payment is not an annuity:
RAP– size of the annuity payment, PSK– initial loan amount, PGS– annual interest rate, SK- credit term.
The advance payment is not an annuity. Typically, it includes interest accrued for the first period, full or partial. A full period consists of thirty-one days. Basically, the preliminary payment is less than annuity payments, but with long-term lending and high interest rates it can be more than regular payments. This formula is used mainly in AHML.
Also, some institutions use a formula where not only the first, but also the last payment is not annuity:
RAP– size of the annuity payment, PSK– initial loan amount, PGS– annual interest rate, SK- credit term.
The first payment represents interest accrued for the first period, the last payment represents the “tails”, the loan balances. The remaining payments are annuity. Residual payment, not annuity. It is formed due to the fact that banking institutions adjust regular payments to an integer number of conventional units. Depending on this, the last payment may be either less or more than regular payments.
Which scheme, differentiated or annuity, is more beneficial to the borrower?
Borrowers often wonder which loan repayment scheme will be more profitable. If you compare the two schemes, the differences include:
- A constant decrease in the payment amount with a differentiated scheme and a constant amount with an annuity scheme.
- With a differentiated scheme, the first payments are somewhat large compared to the annuity scheme.
- The annuity scheme is available to most borrowers, because all payments are distributed evenly over the entire loan term. To choose differentiated payments, the borrower's income must be a quarter greater than the income allowed under the annuity scheme.
- The annuity scheme involves a slow decrease in the principal debt and an increase in accrued interest. If you repay early, the interest paid in advance will be forfeited. With differentiated payments, the loan is repaid ahead of schedule without large financial losses.
- It is much more difficult to achieve accrual of payments according to a differentiated scheme, because the borrower must have large incomes. Approximately, we can say that the income of a potential borrower should be almost twenty percent more than the income allowed under the annuity accrual scheme.
So, the type of payment is the main parameter of the loan, but it is considered only in conjunction with other known parameters.
Currently, advertising of banking products is a popular phenomenon that will not surprise anyone. But how beneficial are the conditions that are described as almost “the best in the world”? Before signing a contract, you should definitely check this issue and know how to calculate interest on a loan in order to understand what amount of overpayments awaits you.
Composition of the loan amount
Traditionally, the loan amount is the amount of funds that the borrower agrees to pay to the bank for providing loan money. Usually includes the amount of the principal debt, insurance payments, interest for using banking services. These can be payment transactions of various nature to third parties, in particular, payment of commissions for accepting cash at the cash desk, as well as payment for the services of an appraiser.
PSK
Introduced since 2008 required condition that it is necessary for the bank to provide information to the borrower about the PSC, that is, about the full amount of the loan, and since 2014, the data is displayed not only on the preliminary payment schedule, but also in the area of the first page of the loan agreement.
Initially, this value was called the effective interest rate, but then it was renamed the PIC. The calculation of this indicator involves the use of a formula with compound interest.
SUM (DPi / (1 + PSC) ^ ((di-d0) / 365) = 0
In this equality the indicator d represented by the date of receipt of the loan and, accordingly, the date of payment of a serial nature. The first indicator is represented by the size of cash flow. This calculation, among other things, includes payments to the credit company, as well as the insurance company as a whole to other persons, if such conditions are included in the agreement and nothing contradicts them.
For example, if you take out a car loan, then its cost includes payment of the payment itself, interest, CASCO insurance costs, and the client’s life. As for the MTPL policy, it does not apply to the general account.
Insurance payments
They do not occur in all loans and sometimes act as optional. For example, in the case of a mortgage, insurance is mandatory. On the other hand, personal insurance is a personal matter for each borrower, so the decision is made strictly independently. However, modern banks in many cases force clients to make insurance payments, and this is illegal.
Hidden fees
Based on current legislation, the main task of banks is that they must provide the necessary information to their clients, including absolutely all payments in the calculation sheets. All commissions applied on the basis individuals, the authorities recognize them as illegal. Therefore, if the borrower has discovered certain problems or demands for payment for the consideration of certain applications or for the provision of settlement sheets, he has the right to go to court, and, if he has previously spent certain amounts on performing these operations, he can return them. 
But if the payments are not related to loan servicing and require the bank’s general tariffs, then you will still have to pay them. For example, such operations include a commission for recounting money, which is charged through the cash register.
Read the contract carefully; hidden fees are often written in small print.
Interest calculation
When considering the question of how bank interest on a loan is calculated, two main methods can be distinguished - payment of annuities or differentiated amounts. In both cases, the accrual is carried out not on the total amount, but on its balance. The only differences are in the way in which it is reduced. In an annuity policy, the borrower pays the debt in equal installments each month, plus interest, resulting in a reduced payment. In the second case, the monthly payment is the same, but the first months are paid interest, and then the loan.
Differentiated payments
Let's consider a situation in which citizen Ivanov decided to take out a loan of 120,000 rubles at an interest rate of 20%. Based on the terms of the agreement, differentiated payments are made by him on the last days of the month. The loan calculation formula in this case involves the use of simple interest.
PC = Loan balance * Interest rate * Number of days / 100 / 365
For example, if the loan was taken out on December 1, 2013, then the amount of first interest is calculated using the formula:
PC = 120,000 * 20% * 31 / 100 / 356 = 2,038.36 rubles
The following amounts are calculated not for the full amount of 120,000 rubles, but for its balance.
Annuity and its calculation
The formula for calculating interest on the loan in this case will be as follows:
PC = (Credit body*Rate %/1200) / (1 – (1 / (1 + Rate % /1200)^n))
The number n is represented by the total number of payments. That is, if we take the data from the example and apply it to the theoretical formula, we can conclude that loan payments will be calculated as follows:
PC = (120,000 * 20/1200) / (1 – (1/(1+20/1200)^12 = 11,126.43 rubles
Thus, we can conclude that the monthly loan annuity will be 11,126.43 rubles. If you multiply this value by the term - the number of months, and then subtract the initial loan amount from it, you can find out the total difference in overpayments. On the website of banks providing loans, there is a special loan calculator that allows you to make calculations quickly.
Sober assessment of the situation
Before directly concluding a loan agreement, it is necessary to study the basic conditions in detail, because cooperation between the borrower and the bank must be mutually beneficial. The lender's goal is to receive interest, the borrower's goal is to minimize overpayments.
Counting overpayments
It is done quite simply. We mentioned it a little, but we can look at it in more detail. To do this, it will be enough to add up the amount of interest for the entire period of lending, and also include additional payments, including hidden ones. The resulting amount should be compared with the original position - this approach will allow you to choose the optimal solution.
The optimal choice - what is it?
So, in order to make a competent decision, it is necessary to compare the values from the previous paragraph not only on the basis of the size of the rate, but also to take into account the payment repayment schemes, the size of insurance payments and some hidden transactions that are specified in the contract. This comparison can be made based on your own expenses or you can create a PSC.
In addition, you always have the right to request a schedule of preliminary payments from the bank and draw certain conclusions based on it.
If we take into account practical experience, it is more profitable to make differentiated payments than an annuity. But when making early payments, the overpayment will be less if you decide to issue an annuity. It is assumed that the timing of the reduction in lending is being considered. Therefore, when choosing an option, you need to take into account not only low overpayments, but also financial capabilities. 
So, we have looked at how the loan is calculated, and we can conclude: this procedure is quite simple. In any case, before completing the transaction, the bank provides a sheet with preliminary calculations of payments. These are the ones that need to be studied carefully and carefully, since, as practice shows, hidden payments are often noted in small print. And it turns out that when signing an agreement, a person expects one payment, and then he is informed about other amounts.
An example of calculating interest on a loan showed that there are several design options, and when choosing them, some details are taken into account. For example, this is the amount of overpayments, your personal financial capabilities, as well as the conditions for providing funds for use. After evaluating all the pros and cons, you can choose for yourself best option. Thus, a loan is beneficial if you have information about it.
Research conducted on the territory of the Russian Federation revealed that more than 73% of citizens of our country have had to deal with a loan at least once in their lives and a quarter of them do not even know how to calculate interest on a loan.
Types of loan payments
When deciding to take out a loan, you need to determine which type of payment is preferable. Calculation of interest on the loan will vary in each case.
Types of loan payments:
- Annuity payment: A monthly payment with a fixed amount, which consists of the amount of debt and interest accrued on it.
- Differentiated payment: A monthly payment that decreases as the loan approaches its final term. It is made up of principal and interest on the remaining amount.
- One-time payment: Monthly payment of interest only; the loan amount itself is paid at the end of the term in a lump sum.
The form of loan repayment in the form of a lump sum payment is usually used when the borrower’s solvency decreases.
Formula for calculating annuity loan payment
The amount of payments for such a payment is fixed, but in some cases it may change:
- By mutual agreement of the parties.
- In case of early repayment of the loan.
So, first you need to calculate such a value as the annuity coefficient (A). To do this, we will find the interest rate coefficient (P) (calculated using the formula: P = C/1200, where C is the annual interest rate set by the bank). Then the calculation formula will look like this:
A = P * (1+P)N / ((1+P)N-1), where N is the loan payment period (in months).
En = A * K, where K is the loan amount.
Sp = Ep - K.
Calculation formulas for differentiated loan payments
The peculiarity of this method is that the amount of payments as the loan is repaid becomes smaller, therefore interest is accrued less and less (since interest is accrued on the amount of debt that has not yet been paid).
Sd = Pk / N, where Pk is the amount initially borrowed, N is the payment term.
- 1 year – 12 months. The formula will look like this: Ps = Ood x PGS / 12, where Od is the remaining principal debt at the time of calculation, Gs is the annual interest rate.
- 1 year – 365 days. In this case, the formula will be: Ps = Od x Gs x Kdm / 365, where Kdm is the quantity calendar days per month (from 28 to 31).
Which loan to choose
First, you need to figure out which loan is the most reliable:
- Express banks. Their big advantage is that to apply for a loan you don’t need to collect a lot of certificates, just a passport is enough, and in 15 minutes the money will be issued. But there is also back side medals: interest rates on this type of loan are very rarely below 50%. Usually they don't give out much this way large amounts(up to approximately 30 thousand rubles).
- “Interest-free” credit services provided in stores. This is usually practiced in stores household appliances. But is it really as profitable as the advertisement claims? For example, a purchase is a TV for 10 thousand rubles. The loan is provided for 24 months. However, when applying for a loan, the buyer will be forced to take out insurance for the same 2 years, which will cost approximately 3.5 thousand. Let's calculate the approximate interest rate: (3500*100)/10000=35% for two years. For the year the interest rate is the same 17.5%. However, if at the bank you can repay the loan ahead of schedule and not overpay extra interest, then this will not work here: the amount of the “overpayment” has already been fixed.
- Official banks. This option is the most reliable. Here the risk of being deceived is minimized.
Today, on the website of almost every bank there is a special calculator that will make all the necessary calculations. The user is only required to enter the initial data.
Another option is to get a preliminary payment schedule for the proposed loan from the bank’s loan specialist; it will indicate the final amount of cash payments.
What type of loan payment to choose
It is difficult to answer this question unequivocally. Will be beneficial for different lending conditions different types payments. What to choose: annuity or differentiated payment is up to the borrower to decide.
If you look at overpayments, then a differentiated payment method will be more profitable. But if you compare the initial loan payments, then in the annuity system they are much lower.
Certainly, the annuity system is simpler and more understandable than the differentiated one, however, the principle “simple means profitable” does not always work. Before signing a loan agreement, it is important to carefully read it several times. If something is unclear, then it is better to ask a bank employee for clarification, because after signing the agreement it will be difficult to challenge anything.
