When buying a house loan, I suggest a friend around me choose the average capital method to repay the loan, saying that it will be less and less and more cost-effective. It may have been incomprehensible at the time. Later, when I think about it carefully, as long as I insist on repaying the loan every month, there will be less and less, and there are still many doubts in my heart. So, what is the average capital? Let's explain it in detail.

1. What is average capital?

Average capital refers to a repayment method of repaying the same principal every month, and the monthly repayment interest is gradually reduced.

Two key points:

1. Pay the same principal every month.

That is, the total loan amount is divided by the number of loan periods, and the principal to be repaid every month is evenly distributed.

For example, if the loan principal is 300,000 yuan and the loan is 10 years, that is, the loan is repaid in 20 installments, then the monthly repayment principal is 300,000 yuan/120 yuan.

2. The monthly repayment interest gradually decreases.

Monthly interest payable = (total loan-accumulated principal repayment) * monthly interest rate,

With the repayment of the same principal every month, the repaid principal will continue to accumulate, and the remaining principal to be repaid will be reduced accordingly, so the calculated monthly interest payable will also be reduced, and the monthly reduction will be equal.

For example, the monthly payable principal is 2500 yuan, so what is the monthly interest rate?

Interest payable on 1 month =(300000-0)* yuan;

Interest payable in the second month = (300,000-2,500) * yuan;

Interest payable in the third month =(300000-5000)* yuan;

Conversely, the monthly interest payable is reduced by 10 yuan, and the interest payable in the last month is = (300,000-297,500) * yuan.

Second, other explanations.

The loan interest rate may not be paid directly to the monthly interest, but the annual interest rate of the loan. You can make the following simple transformations yourself:

Monthly interest rate = annual interest rate/12 months = daily interest rate *360 days.

For example, the current benchmark annual interest rate of loans with a term of more than five years is converted into monthly interest rate = above, which is the relevant content of "what is average capital". I hope I can help you.