A practice that is actively used by borrowers to reduce the amount of debt and monthly payments. But how beneficial is such a procedure? As practice shows, partial repayments often do not work and give the borrower a false impression of savings.

Below we will look at the nuances of this option, in what cases it is worth repaying the loan, and whether early repayment makes sense, and what financier secrets the procedure hides.

Partial and complete?

Today, there are two ways to eliminate debt obligations (except for repaying the debt on schedule) - full and partial repayment of the loan. In the first case, no questions arise. The client comes to the bank, pays the “net” debt and interest accrued for the month. For example, if the debt is 250 thousand rubles, and the monthly payment is 10,000 rubles, of which 4,000 is interest, 254 thousand rubles will be required. It is recommended to deposit the required amount into the account in advance. After full repayment, it is recommended to obtain a certificate of no debt.

In a situation with partial payment, there are two options available:

• an additional amount is taken during the next transfer of money. In such a situation, the client needs to deposit money according to the “plus” schedule;
• reduction of the “body” of the loan with subsequent recalculation of the amount of payments. In this situation, on the day of payment according to the schedule, you will have to deposit less funds.

The principles for reducing the loan size are specified in the agreement between the parties.

Algorithm of actions

It doesn't matter what the task is - repay the entire amount or implement early partial payment. The algorithm of actions is as follows:

• notification to the credit institution of intention. It is recommended to do this at least 14 days in advance. A number of banks do not set restrictions and allow debt repayment ahead of schedule without warning in advance;
• depositing the required amount on the payment day or in advance;
• filling out an application indicating the desire to repay the debt early;
• waiting for money to be withdrawn and receiving an updated payment schedule in case of incomplete (partial) loan repayment. If the debt is paid in full, a certificate is issued with the relevant information.

Banks have personal rules regarding the early fulfillment of financial obligations - this nuance should be clarified in advance.

Which loan is profitable to repay early?

Today the following loan repayment schemes are in operation - annuity and differentiated. In the first case, the lender offers two ways - to reduce the amount of monthly payments or the period of validity of the contract. The first option helps reduce the monthly payment, the second helps speed up loan repayment. With an annuity schedule, early fulfillment of obligations does not make sense if no more than 50% of the contract term has passed. Otherwise, partial repayment will not have an effect, because most of the interest has already been paid.

Let's consider the second option - is partial repayment beneficial when lending on the basis of differentiated payments? The essence of the scheme is that the “body” of the loan is distributed evenly between the loan term, and interest is charged on the remaining debt. Partial repayment is an opportunity to reduce the amount of debt and reduce the monthly burden. This is because interest is charged on a smaller amount. If you have a stable salary, early payment allows you to minimize the number of days before the repayment date and save money. It turns out that a gradual reduction in monthly fees with a differentiated scheme is beneficial.

Disadvantage of early repayment

With an annuity scheme, the client has two options - reduce the monthly payment or reduce the term of the agreement. Banks often leave no choice and gently force you to use the first method.

Psychologically, the option of reducing the monthly payment is convenient, because the client reduces the burden on the budget and receives additional money to solve other problems. If a loan takes the “lion’s” share of family funds, this method is the optimal solution.

This is at first glance. The unprofitability of early repayment is revealed by mathematical calculation using an online calculator. The second option, which involves reducing the loan term, looks more financially attractive.

If you have a choice - a new payment schedule or a reduction in the loan period, you should give preference to the second option. Knowing this feature, lenders rarely agree to reduce the loan term due to loss of profit.

How do banks cheat?

Full or partial repayment leads to loss of income for the credit institution. To avoid this, financial institutions resort to tricks and limit the client's options. Previously, fees and fines were charged for early debt repayments.

After amendments appeared in the Civil Code of the Russian Federation (back in 2011), the possibility of early repayment became the right of the borrower, and banks were prohibited from interfering with this procedure. The main requirement is to warn the lender of the intention to repay the loan ahead of schedule (30 days or more). The information is transmitted to the bank in writing, reviewed by the lender, after which the schedule is adjusted, and the client has the opportunity to fully or partially fulfill obligations.

But banks continue to come up with ways to hinder the borrower’s desire to quickly cope with debt obligations. Here are some of them:

• limiting the amount of partial repayment;
• prohibition of the option for short-term loans (up to 3 months);
• introduction of a moratorium;
• the requirement to make payments strictly on schedule, and so on.

These and other conditions are often reflected in the contract.

How to repay a loan economically - the most profitable schemes

In order not to make a mistake in repayment, the borrower needs to understand the methods. As noted earlier, banks operate two schemes:

• Classic - when the client separately repays the “body” of the loan and interest. As a result, payments are recalculated when the loan is partially repaid. After depositing an additional amount in the next month, the payment amount is reduced (due to a decrease in the size of the “body” of the loan).
• Annuity. This repayment method involves paying the same amount over a period of time, taking into account the schedule. This scheme is most often used by banks when issuing loans to clients. This choice of the lender is explained by the fact that under equal conditions (amount, commission, rate, etc.) the borrower will pay a larger amount than under the classical scheme. Banks present this option to the client as more profitable, which is a deception.

For a differentiated scheme, when the loan is partially repaid, the loan is recalculated. As a result, the borrower solves three problems:

• reduces the debt balance;
• reduces the interest rate;
• gets a chance to skip the next loan payment.

In the case of an annuity scheme, the borrower speeds up the payment process, but does not save money. This is why all options must be calculated before partial repayment. So, if a client pays off an annuity debt for more than a year, he does not save anything, because the main interest has already been paid.

Do I have to pay interest on early repayment?

If the client repays the debt in full, he is forced to pay interest for the month in which the payment is made. This amount is added to the “net” debt.

Large financial organizations strictly comply with Russian legislation. First of all, Article 809 of the Civil Code of the Russian Federation, which discusses the procedure for interaction between the parties to the transaction. This article obliges financial institutions to charge interest on the use of a loan only until the date of its repayment. Requiring the borrower to continue to pay the interest rate on the loan specified in the original agreement after final repayment is a gross violation. If such a requirement is presented, the borrower can send a complaint against an unscrupulous financial organization to the website of the Central Bank of Russia, where the corresponding page is open for citizens to appeal. The Central Bank of the Russian Federation considers all such complaints within 30 days.

Is it always better to deposit a larger amount?

A regular increase in the payment amount is beneficial only with a differentiated repayment scheme. In the case of an annuity, this is only relevant when transferring a larger amount in the first half of the loan term.

With an annuity payment scheme. In both options, the funds deposited early by the borrower are fully used to repay the principal debt to the bank, but the loan parameters change differently after the early repayment.

The first is reducing the loan term. The monthly payment amount is not recalculated.

The second is a reduction in the monthly payment. Cash deposited ahead of schedule by the borrower reduces the debt to the bank, but the bank does not reduce the loan term, but recalculates the amount of monthly payments downward.

Most banks allow the borrower to choose between both repayment options.

When using the first option, interest payments on the loan are reduced, but the monthly debt load is not reduced. The second option, on the contrary, involves a reduction in monthly payments, but interest payments on the loan are reduced insignificantly.

The option of shortening the loan term is beneficial for minimizing overpayments on the loan. From the point of view of reducing the debt burden, the optimal option is to reduce the size of the monthly payment.

If the early partial repayment of the loan is a one-time thing, then the option of reducing the loan term allows you to save several times more on interest payments to the bank than the option of reducing the payment amount.

If the borrower has the opportunity to make partial early repayments regularly and there are no restrictions on their amount in the loan agreement, then both repayment options can be considered economically equivalent. If, during early repayment with a reduction in the payment amount, the funds saved each month are again invested in early repayment, then the savings on interest paid to the bank in both options will be the same. But at the same time, the scheme with a decrease in the payment amount is more flexible, since in the event of any force majeure circumstances, for example, a decrease in the borrower’s income, having a smaller monthly loan payment is certainly more profitable.

1. The loan is in rubles, there are no restrictions on early repayment.

In this case, the use of both the first and second options for partial early repayment is almost equivalent. But it’s still better to reduce the size of the monthly payment and invest the savings again in early repayment.

2. The loan is foreign currency, there are restrictions on early repayment (for example, the amount of early repayment is limited to $500).

Here it will not be possible to achieve the same financial result when choosing the early repayment option. The scheme with a shorter loan term works more efficiently.

3. The loan currency is rubles, there are restrictions on early repayment, money for early repayment is irregular (for example, from an annual bonus or tax deduction).

The situation is ambiguous; you need to make a decision individually, assessing your own risks and priorities.

You can compare both partial early repayment options using a mortgage calculator with the corresponding function.

Just a few years ago, for those who decided to borrow from a bank, the burning question was whether it was possible to repay a consumer loan ahead of schedule.

Since the law did not regulate this in any way, each bank had its own rules. Somewhere there was a moratorium on early repayment. This meant that in order to make a payment in a larger amount than provided for in the schedule, it was necessary to repay the loan for a certain period of time (for example, six months).

In others, fines were levied for carrying out the early cancellation procedure.

In this way, banks tried to prevent clients from resorting to early repayment. The reason is simple: for a credit institution, a loan returned ahead of schedule means a loss of interest income. And this already answers the question whether early repayment of the loan is beneficial for the borrower.

Early repayment according to current legislation

Now you can repay an annuity loan early at any bank. The law stipulates that lenders do not have the right to prohibit borrowers from returning money faster than planned, as well as to set any requirements for early repayment (for example, the bank cannot set a minimum amount of additional contributions or their frequency).

Banks can only include in the loan agreement a clause stating what the result of early repayment of a consumer loan will be: with a reduction in the term of the loan or with a reduction in the monthly payment.

Some may offer customers a choice, while others leave only one option. In this case, the borrower can only resign himself, since the law only says that the client has the right to make partial and full early repayment. At the same time, the term or monthly payment will be reduced, this is not stated anywhere.

So, having discussed what early cancellation is and whether it is allowed or prohibited, let’s talk about how beneficial it is.

Is it profitable to repay a loan early?

As already mentioned, if the client repays the loan early, the bank loses interest. And since the bank does not receive interest, therefore, the borrower does not pay it. It turns out that partial early repayment of a bank loan is beneficial.

When making an early cancellation, there are some important things to remember.

Firstly, interest recalculation only applies to future payments. If you paid the loan for a year, then no one will return the interest for this period to you. You used the funds at that time, therefore, the bank honestly earned the interest paid.

Secondly, the bank will only recalculate interest. No matter how many times you make early repayments, the principal debt will not change. That is, it will decrease, naturally, but by the amount that you repay. Additionally, the bank will not write off anything.

Thirdly, the bank will receive its interest in any case. In accordance with the loan agreement, the components of the payment are written off in the following order:

• penalties, penalties;
• overdue debt;
• interest for the current month;
• main debt.

As you can see, until the bank writes off absolutely all the accumulated debt, there can be no talk of reducing the principal debt.

By what amount will the principal debt decrease after the “early term”?

In your payment schedule, each monthly payment is divided into 2 parts: principal and interest on the loan. For a month, the bank must charge you in total as much interest as is written in the schedule.

Therefore, when you come to the bank with a certain amount of money, keep in mind that the principal debt will not decrease by it, but by the difference between the deposited amount and interest for a given month.

For example, a client makes an early repayment in March, in which the bank must receive 3,850 rubles of interest from him. The client deposited 40,000 rubles into the account. After the early repayment procedure, the loan debt will be reduced by 36,150 rubles.

When to make early repayment?

How profitable early repayment will be depends on how long after taking out the loan it is carried out. Remember rule two: only interest is recalculated. Therefore, it is advisable to arrange early repayment during the period when the most interest is charged.

Open your payment schedule and look at the loan interest column. Regardless of whether you have differentiated payments or annuity payments, the amount of interest charged is constantly decreasing. That is, in the first months they are the largest.

With annuity payments, approximately halfway through the term, the amount charged for using the loan is equal to the amount used to pay off the loan debt. In the second half of the term of the loan agreement, less interest is received than the principal debt.

A simple conclusion follows from this.

It is more profitable to carry out early repayment in the first half of the term of the loan agreement.

If you do this closer to the planned closing of the loan, then you will receive practically no benefit. Just close the loan a few months earlier. However, this will rather bring moral satisfaction.

Reducing the term or payment: which is more profitable?

If the bank has decided for you to reduce the term or payment, then there is nothing to think about: you need to get the maximum benefit in the proposed circumstances.

If the decision falls on you, then the desire to save more inevitably arises. Make sure you end up paying less interest.

What do I need to do?

First of all, you need to remember that the overpayment directly depends on the duration of the loan agreement. The longer you take to pay off your loan, the more you will end up paying. It already follows from this that it is more profitable to reduce the loan term.

Therefore, when choosing a method of early repayment, you need to take into account your financial burden. If you have many loans, the total payments on which eat up half your salary, it would be more logical to reduce the payment. You may save less than you could, but it will make it easier for you to repay the loan.

If you are satisfied with the size of the monthly payment and after making it there is enough money left to maintain your usual lifestyle, then you need to reduce the loan term. It won't be more difficult for you, since the payment will not increase. And the interest benefits will be tangible.

To verify the benefits of reducing the term, you can contact the bank and ask to see two options for the schedule: the first - with a decrease in the term, the second - with a reduction in the payment for early repayment by the same amount.

They will not tell you the formula by which calculations are made when carrying out early repayment. And the employees know it only in general terms; everything is calculated by the program. However, you can easily understand which option is more profitable. To do this, you need to look at the “Total” column in the column with interest payments in both charts. If the loan is large enough, then the difference can reach 100-150 thousand rubles.

If the term is reduced, the overpayment will be less than if the monthly payment is reduced.

To understand how early loan repayment occurs, you need to understand how monthly loan payments are made.

As a rule, when people come to a bank and give money to an employee, they believe that in this way they will instantly make a payment on the loan. Although the loan agreement says that this is not so.

The account in which the loan debt is directly recorded starts at 455. Take the documents and see which account you are depositing funds into. It starts at either 423 or 408.

This fact does not depend on which bank the loan was taken from, since the system of accounts is the same everywhere, it is regulated by the Bank of Russia.

You deposit money into this account, and it stays there until the next payment date. And on this day they automatically go to account 455, where they are reflected as a monthly payment.

No matter how much you put into the account for write-off, exactly the amount provided for in the schedule will be used to repay the loan.

What does it take to repay a loan early? In order for early repayment to be successful, you must either complete this procedure yourself in your Personal Account on your bank’s website, or come to the bank and tell the employee that you want more funds to be spent on the loan than planned.

The employee will then let you sign an application for early cancellation. Each bank has its own form, but information on the loan agreement, amount and date of write-off will certainly be there.

You most likely won’t have to write an application yourself: such forms are usually generated by a program, after which the client simply signs.

The deadline for executing the application should be clarified with the credit institution: in some places the repayment is made on the next business day, in others on the same working day. And some banks practice early repayment online.

Who can apply for early repayment?

For consumer loans, the borrower is usually one person. Co-borrowers are a rather rare phenomenon. But a mortgage, on the contrary, is often taken out jointly by husband and wife. Moreover, in a number of banks, spouses are required to become co-borrowers.

In these cases, the question arises whether the person who is listed second in the loan agreement can carry out the early repayment procedure. Of course, the requirements depend on the bank.

However, from the point of view of the law, both co-borrowers have absolutely equal rights and obligations regarding the common loan.

Any of the co-borrowers has the right to make early repayment (full or partial).

The opposite situation is observed if one of the spouses takes out a loan, and the second, not being a co-borrower, wants to carry out the procedure for early repayment. He will be able to transfer funds to the account, since anyone can do this, but he will not be able to write an application for early repayment.

Early cancellation by power of attorney

In this case, it is necessary for the borrower to either come to the bank or ask him to issue a notarized power of attorney for his spouse, where he will write down what powers he allows to exercise.

The more detailed the rights of the trustee in the power of attorney are described, the better. Each bank has its own procedure for repaying a loan ahead of schedule by a trustee, so you should not get off with general phrases.

Regardless of the creditor bank, the notary must include the following information in the power of attorney:

• data of the principal and the authorized representative;
• a loan agreement for which a power of attorney is issued;
• operations, the performance of which is provided for by this power of attorney (receiving certificates, carrying out full or partial early cancellation, and so on).

If it turns out that the power of attorney only states the right to formalize early repayment of a consumer loan, then after that they are unlikely to tell you whether the money was successfully written off or whether some problems arose.

Conclusion

So, early repayment can be made by any of the co-borrowers for any amount. This can be done as often as desired; banks do not have the right to interfere with this procedure. It plays into the client’s hands, so if possible, it is better to repay the loan ahead of schedule.

To get the most benefit, you should shorten the loan term rather than the monthly payment. As for the question of when you can repay a bank loan ahead of schedule, it is advisable to do this in the first half of the contract term: the savings on interest will be maximum.

The desire to get out of debt and repay a loan as soon as possible is understandable to probably everyone. Borrowers who make monthly payments in excess of the plan, or close the loan ahead of schedule, pursue the same goals - to reduce their overpayment on the loan and get rid of the “debtor” status. How simple is the procedure for early debt repayment and does it allow you to significantly reduce loan costs? We will talk about this, as well as the technical side of the process of early loan repayment, in more detail.

Full and partial early repayment of the loan

You can repay the loan early in full or in part. In the first case, you deposit into the account an amount equal to the balance of the “body” of the loan, and the interest accrued at the time of repayment. After this, your debt to the bank is closed. In the second case, you pay an amount that exceeds your monthly payment specified in the schedule. The loan is not closed, but bank employees are obliged to give you a modified repayment schedule: according to the agreement, either the planned payment or the loan term will be reduced (in both cases the amount of accrued interest will be reduced).

Banks have always sought to complicate the procedure for early loan repayment as much as possible and make it unprofitable for the client. This desire was explained simply: financiers did not want to lose their profits in the form of interest. Now the situation has changed somewhat, but problematic issues still remain. Next, we will look at the legal basis for early repayment of debt and find out what changes have been made to existing laws over the past 2 years.

Early repayment - the legal side of the issue

The procedure for early repayment of a loan is regulated by the Civil Code of the Russian Federation. On October 19, 2011, Federal Law No. 284-FZ “On Amendments to Articles 809 and 810 Part 2 of the Civil Code of the Russian Federation” was adopted. This regulatory act officially prohibited the collection of fines and penalties from borrowers for early repayment. In particular, the law establishes:

1. The right of the bank to receive interest from the borrower under the agreement, inclusively until the day of repayment of the debt in full or part thereof (clause 4 of Article 809 of the Civil Code of the Russian Federation). Previously, banks had the right to demand payment of interest for the entire period of the contract (regardless of when the borrower actually closes the loan), as well as charge fines and penalties for deviations from the schedule. Please note that this law has retroactive effect, that is, even if your loan agreement states the bank’s right to demand payment for early full or partial repayment of the debt, according to Law No. 284-FZ, these norms are invalid.
2. The borrower’s obligation to notify the lender of his intention to repay the debt early at least 30 days before the planned repayment date, unless a different, shorter period is established by the agreement (Article 810 of the Civil Code of the Russian Federation). This applies only to loans to individuals. In fact, in order to comply with this legal requirement, the borrower must personally contact the bank and draw up a notice, which he is required to accept and register.
3. Possibility of early repayment of debt with the consent of the creditor (clause 2 of Article 810 of the Civil Code). Previously, this clause was not in the Civil Code. Now banks, not being able to fine borrowers, have the right to deny them the possibility of early repayment. Many financial institutions take advantage of this, especially when it comes to paying off mortgages and car loans. In some cases, banks indicate a minimum amount for early loan repayment. Formally, this is done in order to prevent clients from abusing their capabilities; in practice, to limit the client’s right to reduce the overpayment on the loan.

Other changes in the legislative framework are expected in the near future: this fall, in the Second Reading, the State Duma will consider the law “On Consumer Lending,” which provides for a ban or the imposition of fees on early repayment of mortgage loans during the first year of the loan agreement.

The early loan repayment scheme may differ for each bank. Next, we will look at the main options and give recommendations to those borrowers who want to repay their loans ahead of schedule without having problems with their creditors.

Rules for early loan repayment and basic recommendations for borrowers

Most banks have approved the following scheme for early repayment of the entire loan or part of it:

• at least 30 days before the scheduled date of repayment, the borrower visits the bank branch where the loan was issued and draws up a notice of his intention, indicating the expected amount of payment;
• Usually you need to call the manager to get an answer. In most banks, “tacit consent” can be obtained immediately, but sometimes you need to wait up to 5 days;
• financiers will tell you the deadline by which the payment must be made. This is usually the date the obligatory scheduled payment is made. You do not have to come to the bank on this particular day. You can deposit funds into the account in advance, but the schedule will be recalculated on the day set for making the scheduled payment (if the repayment is partial). With a full early refund of funds, date restrictions are rarely applied, since the schedule does not need to be recalculated;
• in case of a partial refund, after the day set for making the scheduled payment, the client must contact the bank branch to receive a modified payment schedule;
• in case of a full refund, the client must contact the branch and receive a written notification that his loan agreement is closed (usually the bank issues a letter drawn up on letterhead with the signature and seal of the head of the territorial unit). It is necessary to receive a notification at a minimum in order to be sure that the bank no longer has claims against you, you do not have an outstanding debt, on which interest and penalties will then be charged. Also, these letters may be required when applying for a loan from another bank and if disputes arise with the client’s credit history. Credit institutions may “forget” to provide the BKI with information that you closed your loan in advance.

The scheme described above is the most common. There are also variations, for example:

• some banks can recalculate the schedule on any day, so you can repay the loan ahead of schedule at any time convenient for you;
• an amended schedule may be issued before the payment is made, but comes into force after partial early payment of the debt is made;
• In some credit institutions, the process of early repayment is simplified as much as possible. You can, without notifying the bank, independently, for example, using Internet banking, deposit into your account an amount exceeding your planned payment, and then print out the newly generated payment schedule. In this case, in case of full early repayment, it is still recommended to contact the branch and receive a letter about closure of the loan.

Having considered the early repayment procedure, we should return to the issue of its benefits. More about this in more detail.

Calculating the benefits of early repayment: when is it advisable to “get ahead” of the schedule?

As you can see, if you pay off your debt six months ahead of schedule, contrary to popular belief, you will save more with the annuity scheme.

Thus, we are convinced that early full and partial repayment of debt is always beneficial, despite the fact that banks are trying in every possible way to complicate this procedure. By accumulating funds and taking the time, you can significantly reduce the amount of overpayment on the loan. In addition, getting rid of the “debtor” status always has a fruitful effect on a person: financial freedom is an important aspect that should not be forgotten.

Applying for a loan from a bank is confirmed by documentation - drawing up an agreement. It indicates the loan amount, the period during which the debt must be repaid, as well as the payment schedule.

The loan repayment methods are not specified in the agreement. Consequently, the client can choose the most convenient option for himself, but without violating the terms of the agreement with the bank. In addition, a financial institution can offer its clients various methods of issuing and repaying a loan.

Types of debt

A few words should be said about them. The bank allows the client to personally select the method of repaying the bank loan on convenient terms.

Repayment of borrowed funds can be carried out:

Annuity payments

Having chosen this debt repayment option, the client will have to pay equal amounts every month. They will not change until the end of the contract.

If the borrower repays the money using the annuity method of repaying the loan, it means that the money is deposited at the same frequency - on a certain date of each month, and the payment amount is fixed and does not decrease until the end of the established period.

But the amounts only seem to be the same; there is still a difference in their structural component. It changes throughout the year, so the first and last payment will vary.

Example of an annuity payment

The client took out a mortgage loan for a period of 15 years, the amount was 3 million rubles, and the annual interest rate was 10. According to the bank’s calculations, the client must repay 32,238 rubles monthly. The amount will remain the same, but the structure will be different.

The principal debt owed to the bank is called the “loan body”. When the borrower makes the first payment, about 8,000 rubles will go towards repaying the loan body, and the remaining amount will be interest. And they do not reduce the principal balance due on the loan.

For the first six months, the client makes payments on the loan, which is used for interest payments. But after six months, money will begin to flow in to pay off the principal debt.

The peculiarity is that the client first pays off the interest. Only after some time is the “loan body” reimbursed. Gradually, the interest payment decreases, and the principal payment increases. This changes the structure of the loan, but the payment amount remains constant. The client does not always know about these changes in debt. For him, as a rule, the immutability of the payment amount is important.

If a borrower has been constantly depositing money into a bank account for several years, and in the end the amount of debt has decreased slightly, this means that all the time he was paying off interest, and not the principal debt.

To quickly move on to repaying the principal debt, you can use the method of early repayment of the loan. But it is not suitable for every debtor.

At the same time, it is not necessary to close the contract completely in order to save on loan repayment. Experts note that it is enough to deposit the possible amount greater than the amount of the main payment, and subsequent recalculation will reduce the interest rate and the total payment.

It is worth making deposits early as early as possible. Because the more time has passed since the start of loan repayment, the less profitable early payment becomes. If such a payment is made in the first part of the debt repayment, then the interest payment and monthly fee can be significantly reduced. Subsequent early overpayment is not able to bring such a benefit, due to the fact that a large amount of interest is returned.

Calculation of annuity payment

When applying for a loan, everything is taken care of. But, if the client wants to make sure that payments are calculated correctly, he can independently make calculations using the following formula:

X=S*(P+(P/(1+P)С – 1))

X is the payment amount that is paid every month;

P - interest (for 1 month). To find out what P is equal to, you should divide the basic rate by the year. More precisely, for 12 months;

C - loan term.

During the calculation, you need to add interest for the entire period to the principal debt (to the “loan body”), and divide the amount by the number of years. The main thing about this type of loan is that the loan amount and interest payments will vary at different times. This allows the bank to benefit in any case. Even if the client wants to repay the debt early, the lending party will still receive a good income.

Pros and cons of annuity payment

This method of loan repayment has a number of advantages:

1. Simple calculation of payments, you can plan in advance the costs of paying your monthly debt.
2. If the exchange rate of national currencies decreases, the payment is reduced.
3. The amount is fixed and unchanged throughout the entire period.

But any system has its drawbacks, including this one. These include:

1. A large amount of overpayments due to interest and the duration of the contract. The longer the loan term, the more significant the overpayment.
2. It is difficult for the client to independently calculate the amount under the annuity system.
3. It is beneficial to repay a loan early only in the first half of the payment term, because initially the funds repaid by the borrower go to pay off interest, and then to the loan body.

Whether this method of debt repayment is suitable for the client or not is up to him to decide.

Differentiated payments

This is the second way to repay the loan. The main difference between such a payment and an annuity payment is the change in the amount of monthly contributions. The longer the borrower takes to pay the loan, the smaller the payment. But they are no different in composition: “loan body” and interest.

The principal amount remains unchanged throughout the term of the contract. But the interest-bearing debt becomes less. Due to the reduction in interest, the size of the contribution also changes.

Example of differentiated payment

The lending conditions are the same as for the annuity method of debt repayment. Comparing the structure of the initial and final installment, you can notice a big difference - there has been a decrease in the amount.

In the last payment, unlike the first, there is almost no interest part. The main credit burden will be in the first stages of debt repayment, then it gradually decreases. This is why the differentiated loan repayment method is not suitable for everyone. Not every payer has the ability to make large initial payments.

If you compare the two methods of repaying debt with each other, you can see how much the amounts differ. Under the same initial terms of the contract: the annuity payment amount by the end of the year will be 5,867,344 rubles, and the differentiated payment amount will be 5,262,501 rubles. Therefore, this is the most effective way to repay interest on a loan. The difference is colossal.

Calculation of differentiated payments

The calculation of this is much simpler than that of an annuity. To carry out the calculations, you need to add the principal amount of the debt “loan body” with the accrued interest. The loan amount is divided by the number of months on the loan.

Example. The borrower took out a mortgage for 3 million rubles for a period of ten years, the rate was 12 percent.

3,000,000 rub. / 120 months = 25,000 rub. The percentage will constantly change, therefore, when paying half of the amount (1,500,000 rubles), the further calculation looks like this: ((1500,000*12%)/12)/100= 15,000 rubles.

Pros and cons of differentiated payment

Advantages of this method of loan repayment:

1. The overpayment on the loan is significantly reduced. This occurs due to lower interest rates throughout the loan period.
2. Simple payment calculation.
3. The payment amount decreases every month, which reduces the credit burden on the borrower and makes it psychologically easier to bear debt expenses.

While there are clear advantages, there are also disadvantages to this payment scheme:

1. You cannot enable auto payment because the debt amounts are different every month.
2. You can deposit little money and end up late, so you always have to contact the schedule or the bank to clarify the next payment.
3. At first, the loan amounts are very large.

The most advantageous type of loan repayment is selected from the total loan amount and repayment terms. It is worth noting that the chosen method cannot be changed to another during the entire period of the contract.

Cash loan repayment method

It is possible to pay cash for a loan, but it is extremely inconvenient, because you need to deposit money into the cash register. To do this, you will have to come to the branch office in person.

It’s worth paying through the cash register if:

• there is little time left to make the next payment;
• the client does not want to pay a transfer fee;
• the borrower does not have confidence in the correct self-crediting of funds.

Only individuals use cash; for companies this is inconvenient and unacceptable.

Non-cash loan repayment method

If a person values ​​his time, then the fastest option to make a payment is by bank transfer.

Types of non-cash transfer:

1. Transfer from a plastic card to a bank account.
2. Repayment through accounting. When a salary is credited to an employee’s card, the loan payment amount is automatically written off.
3. Use of electronic wallets and multi-cash.
4. Postal transfer.

It is possible to make a cashless transfer quickly, but crediting the money to your account may take some time. Therefore, it is better to take care of this in advance.

Banks give their clients the opportunity to choose the order and methods of loan repayment. The borrower himself decides how to pay - with an annuity or differentiated payment, deposit cash at the cash desk or make a wire transfer.

In any case, before applying for a loan, the client must decide in advance on the further repayment of the debt. And if he is able to handle the initial loan burden of a larger amount, it is worth choosing a repayment system with decreasing payments to save on overpayments.