Many people are borrowing nowadays, largely due to low credit rates. Before you take out a loan, be careful to find the best loan type you need and the best loan structure. When choosing a loan, interest and APR are very important. What cannot be ignored is the installment payment. It is important that the loan repayer can fit into the monthly expenses and not burden the family cashier. For this to work well, it is good to know how to calculate the installment.
An important aspect of bank credit schemes is that the monthly payable amount is the same, month after month. The monthly payment obligation consists of two parts:
- Interest payable on the outstanding debt.
- Capital that actually decreases the debt after the due date.
The interest is payable on the actual debt
So the amount is higher at the beginning of the term, since then the debtor’s outstanding debt is the highest, ie initially a smaller amount of the monthly money goes to the capital debt.
During the term, the ratio of interest to capital does not change to the same extent. The outstanding debt at the end of the term decreases much more than in the initial period.
The monthly installment depends on:
- the amount of the loan taken out
- interest rate
- from maturity
The ratio of interest and principal included in the repayment installment changes as the maturity and interest rate change. In the case of longer maturities, the bank has to repay more interest. This is logical as you continue to use the bank’s money and you have to pay interest on a larger percentage over time. A lower interest rate is less than the total amount to be repaid, but this reduction is partly due to the fact that you are paying interest on less capital. The composition of the installment does not depend on the amount of credit taken.
When choosing a loan
It is important to look for the best interest rate loan for the selected interest period. It is inexpensive to get a loan when you start, if the interest may rise. Isolde’s loan calculator can help you find the best loan. Whether it’s a personal loan, a free use mortgage, a home loan, here you will find offers from several banks in one place. There is no obligation in the calculation. After entering your information, the system will provide you with a list of credit institutions that you may have a chance to borrow. All you have to do is choose the most sympathetic one.
It is worthwhile to apply for a loan for a shorter term, ie to pay a larger installment. Of course, only if your household’s load-bearing capacity allows it. Only pay the amount you can safely pay each month. If you feel that the calculated installment does not fit into your monthly budget, you should choose a longer maturity and a lower repayment.