When lending to apply annuity payments. What exactly is a payment?
Annuity called the monthly payment on the loan. Payment for the entire crediting period remains unchanged. Now, most banks engage in lending mainly annuity payment. It is used in virtually all types of lending. For the bank more profitable these types of calculations, as it brings them more revenue in the form of interest on the loan, and the client receives a convenient form of payment. Of course, it is very convenient to every month to deposit the same amount at maturity and the interest on the loan principal. This amount is easy to remember and does not require regular visits to a representative of the bank to determine the amount of the next payment.
During the crediting period the amount of payment does not change. It is calculated on the basis of their capacity (income) of the borrower. This also includes an adjustment period or the loan amount. System of repayments annuity is fairly simple. Monthly repayment of the loan in the account is debited the same amount, which is equal to the amount of the loan and interest thereon for the full accrual period divided by the loan term (in months). Summing up the above, we can conclude that, if repayment of the loan the borrower is made ahead of time, say, three years, the interest that was paid earlier, shall not be subject to recalculation.
This is because there is calculated on the actual balance on the loan, which depends on the amount that the borrower has already paid. Of course, if the borrower immediately took credit for three years, the annuity payment would amount to a large sum. Consequently, the principal would be repaid faster, and interest would be paid less. But it is actually the borrower does not repay the loan in a greater amount, and therefore used the loan funds equal to the size of the outstanding balance.
Accordingly, the previously accrued interest on the debt is justified and, therefore, reason to recalculate the case of early and full repayment of the loan is not. It should again focus attention on the fact that this statement is true only if the other is not reflected in the contract, or in the calculation of payments does not take into account the interest payments to the bank in advance for future periods.
In that case, if you plan to repay the loan ahead of schedule, here there are two options: you can make a reduction of the loan or reduce the amount of monthly annuity payment.
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