What difference does it make what payment scheme is used if you still have to say goodbye to the money? We wouldn't say that. Differentiated and annuity payments differ not only in their mechanics, but also in the final amount. Despite this, both of them have their advantages, so we recommend that you understand the pitfalls before plunging headlong into one or another loan.
❝Differentiated payment is a method of repaying a mortgage or loan, in which the amount of payments decreases with each subsequent payment.❞
Why does this happen? Each payment consists of the body of the debt and interest. The body is divided into equal parts, so when you gradually repay the debt, you reduce its size, on which interest is calculated. Thus, along with the change in the body, the percentage of debt also changes, which is why each next payment becomes smaller and needs to be carefully recalculated.
So that you better understand the mechanics and do not get confused in your own debts, we offer a simple scheme for calculating them:
Fixed part covering the body of the debt + variable part covering interest = Differentiated payment
The fixed part is very easy to find out - you should divide the entire amount by the number of months, that is, by the number of payments.
The part responsible for the percentage is calculated according to a more complex scheme:
(Balance of debt × Annual interest rate × Number of days in the billing period) / Number of days in a year
As you can see, in order to determine how much to pay next time, you will have to tinker a lot with the calculator. The first fixed payment will be quite large, so not every investor can afford such a payment scheme. Also if in the case of annuity payment If you need to pay a fixed amount every month and not worry about the fact that you could have made a mistake in the calculations, then with a differentiated payment you will not have such confidence... But it also has its own obvious advantages, namely savings. Due to the fact that each time the amount of debt decreases, you will have to pay back less interest, so you will not overpay. Of course, this is not very profitable for the bank, so such payment schemes are becoming less and less common.
Example of use:
— How much will you have to pay on the loan this month?
— I need to calculate the amount of the differentiated payment, so you can’t say it that easily. I just now began to understand that mathematics really needed to be taught at school...
Are you planning to buy an apartment? by installments or want to immediately become her rightful owner? Whatever your request, THE Capital agency experts will help you solve it.
