Only by adopting average capital will the monthly repayment amount become less and less.
Interpretation of the method of average capital and equal principal and interest repayment
Average capital refers to a repayment method of loans. During the repayment period, the total amount of loans is divided into equal parts, and the same amount of principal and interest generated by the remaining loans of the month are repaid every month. In this way, because the monthly repayment amount is fixed and the interest is less and less, the borrower is under great pressure to repay at first, but as time goes on, the monthly repayment amount is less and less.
Calculation formula of average capital loan:
Monthly repayment amount = (loan principal/repayment months)+(principal-accumulated amount of repaid principal) × monthly interest rate.
Matching principal and interest means paying the same amount of loans (including principal and interest) every month during the repayment period.
Calculation formula of matching principal and interest loan:
Monthly repayment amount = [loan principal × monthly interest rate ×( 1+ monthly interest rate )× repayment months ]≤[( 1+ monthly interest rate )× repayment months]
The characteristics of equal principal and interest repayment method: the principal of equal principal and interest repayment method increases month by month, the interest decreases month by month, and the monthly repayment amount remains unchanged; Compared with the repayment method of general capital, the disadvantage is that there are many interest expenses. Interest accounts for most of the monthly payment in the initial repayment period. With the gradual return of the principal, the proportion of the principal in the contribution is also increasing. However, the monthly repayment amount of this method is fixed, which can control the expenditure of family income in a planned way and facilitate each family to determine the repayment ability according to their own income.
The characteristics of the average capital repayment method are: the principal of the average capital repayment method remains unchanged, the interest decreases month by month, and the number of monthly repayments decreases; Because the monthly repayment amount is fixed and the interest is getting less and less, the lender is under great pressure to repay at first, but as time goes on, the monthly repayment amount is getting less and less.
Compared with the two, in the case of the same loan term, amount and interest rate, at the initial stage of repayment, the monthly repayment amount of average capital repayment method is greater than the equal principal and interest. However, according to the whole repayment period, average capital's repayment method will save the expenditure of loan interest.
Generally speaking, the repayment method of equal principal is suitable for borrowers who have a certain economic foundation, can bear heavy repayment pressure in the early stage and have an early repayment plan. Matching principal and interest repayment method is convenient to arrange income and expenditure because the monthly repayment amount is the same, and it is suitable for borrowers whose income is relatively stable because economic conditions do not allow early repayment and excessive investment.