WHAT IS ANNUAL AND DIFFERENTIATED PAYMENTS10.02.2020
When applying for a loan, banks indicate to which type of repayable loan the contract will apply. There are two options for monthly annuity or differentiated payments. Now the majority of banks do not provide customers with options, but indicate the type that suits them more and, as a rule, banks establish the type of payment annuity. So banks can earn more, and most importantly they reduce the risks of non-repayment of the loan.
An annuity payment is when a client pays a loan in equal installments every month and the payment amount does not change. A good loan calculation service, shows data on the current interest rates of popular banks. With differentiated payments, the situation is different, the amount of payment under a loan agreement will change every month, while it will only decrease.
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The most important advantage of annuity payments is that the loan payment amount will be less than with a differentiated type of payment, but this situation will not be constant, since with differentiated payments the payment amount decreases every month and at a certain point it will become less than with an annuity payment .
If you could find a bank offer where you can choose your own loan payment scheme, do not rush to make a decision, it is better to carefully weigh all options and proceed only from your capabilities. Also pay attention to the interest rate, it may differ for different types of loan repayment.
1. Buying on credit is more expensive than without a loan
Buying a thing on credit, in addition to the value of the thing, you pay interest. In the case of consumer loans, they can be substantial. You give money to banks that you could spend on other purchases.
There are people who find it difficult to save money. They prefer to buy things on credit in order to give a certain amount to the bank every month. But what prevents to save the same amount without a bank? It turns out that due to psychological problems or inability to manage finances, you are hurting yourself.
2. Together with a loan insurance is often imposed
Often, to get a loan you need to take out insurance. The desire of the bank is understandable. If something happens to the borrower, the insurance company will pay the loan. But for the borrower, insurance is an additional cost that increases the final cost of the thing.