It is feasible to borrow money from a bank when one's economic ability cannot take out a huge sum of money at one time. After the loan is successful, there are two repayment methods: average capital method and equal principal and interest method.
There is a word difference between the two repayment methods, but there is a big difference.
So, which repayment method is the most cost-effective?
Let Sister Ka take you to find out today.
Average capital plus interest
Matching principal and interest is also called regular interest payment, that is, the borrower repays the loan principal and interest in equal amount every month, calculates the monthly loan interest according to the remaining loan principal at the beginning of the month, and settles it every month.
Because the monthly repayment amount is equal, in the initial monthly repayment of the loan, after excluding the monthly settlement interest, the loan principal is less; In the later stage of the loan, due to the continuous reduction of the loan principal, the loan interest is continuously reduced in the monthly repayment amount, and the monthly repayment of the loan principal is more.
This repayment method actually takes up more bank loans and takes longer. At the same time, it is also convenient for borrowers to reasonably arrange their monthly life and financial management (such as renting a house, etc.). ). It is undoubtedly the best choice for those who are proficient in investment and are good at "taking Qian Shengqian as their home"!
Calculation formula of equal principal and interest repayment method:
Monthly repayment amount = [principal * monthly interest rate *( 1+ monthly interest rate) loan months ]/[( 1+ monthly interest rate) repayment months-1]
Monthly interest = residual principal * monthly loan interest rate
Total repayment interest = loan amount * loan months * monthly interest rate *( 1+ monthly interest rate) loan months /[( 1+ monthly interest rate) repayment months-]-loan amount
Total repayment amount = repayment months * loan amount * monthly interest rate *( 1+ monthly interest rate) loan months /[( 1+ monthly interest rate) repayment months-1]
Note: In the method of matching principal and interest, banks generally charge interest on the remaining principal first and then on the principal, so the proportion of interest in monthly contributions will decrease with the decrease of principal, and the proportion of principal in monthly contributions will increase, but the total monthly contributions will remain unchanged.
Average capital
Average capital is also called unequal interest repayment method. The lender will allocate the principal to each month and pay off the interest from the previous trading day to the repayment date.
Compared with the matching principal and interest, the total interest cost of this repayment method is lower, but the principal and interest paid in the early stage are more, and the repayment burden is reduced month by month.
Average capital repayment method is a very simple and practical repayment method. The principle of the basic algorithm is to repay the loan principal in equal amount on schedule during the repayment period, and at the same time pay off the interest generated by the unpaid principal in the current period.
Calculation formula of average capital repayment method:
Monthly principal and interest repayment amount = (principal/repayment months)+(principal-accumulated repaid principal) * monthly interest rate.
Monthly principal = total principal/repayment months
Monthly interest = (principal-accumulated principal repayment) * monthly interest rate
Total repayment interest = (repayment months+1) * loan amount * monthly interest rate /2.
Total repayment amount = (repayment months+1) * loan amount * monthly interest rate /2+ loan amount.
Note: In the average capital method, the amount of principal returned by a person every month is always the same, and the interest decreases with the decrease of the remaining principal, so the monthly repayment amount gradually decreases.
The difference between the two
For property buyers, the difference between the two methods will produce very different results. Under normal circumstances, the total interest paid by equal principal and interest is more than the average capital. The longer the loan period, the greater the interest difference. Matching principal repayment can quickly reduce the repayment pressure and reduce the money that buyers spend on interest, but prepayment is very painful. So more people choose equal principal and interest.
Take the 20-year loan amount of 6,543,800+000 as an example. What is the difference between the two repayment methods? Let's look at a picture first:
The red part of this picture is repayment interest, and the blue part is repayment principal. In the repayment method of equal principal and interest, with the gradual reduction of the remaining principal of the loan, the proportion of interest is also gradually reduced. Matching principal repayment method, the principal paid every month remains unchanged, but the interest gradually decreases, and the amount paid every month is getting less and less.
In the previous eight years, the average capital payment was more. Therefore, although the interest on average capital will be less, in the first eight years, the repayment pressure on average capital was greater, and it did not feel the benefits of less interest.
From this perspective, matching principal and interest repayment is actually to exchange more interest for less repayment pressure. At the same time, for buyers with less down payment, the repayment mode of equal principal and interest can also support a larger amount of loans.
So, is equal repayment of principal and interest necessarily suitable for everyone?
In reality, some property buyers will not really undertake loans for decades. When the real estate is transferred for sale, the buyers who previously chose "equal principal and interest" will suffer more. Because in the process of repayment, there is still a lot of principal remaining, and under the average capital method, most of the principal has been paid off, and the corresponding loans to be repaid have been much less.
Therefore, for investment-oriented property buyers and property buyers with higher down payment ratio, the average capital is actually more cost-effective.
On the one hand, investment buyers hope to repay the loan quickly and avoid the dependence of the house on cash flow. Then in the case of short loan time, it will be better to repay the loan quickly and choose the average capital.
On the other hand, the average capital can save some interest. On the one hand, it can quickly reduce the remaining principal, repay the remaining loan quickly when necessary, and then refinance with the house.
Choose the most suitable repayment method.
Having said that, many readers may be confused. Here, Sister Ka will show you the difference between average capital and equal principal and interest through an example.
Example: Mr. Wang bought a 4 million commercial house, and he borrowed 2.8 million from the bank. The repayment period is 30 years, and the commercial loan interest rate is 4.9%. Now we use the average capital method and the equal principal and interest method to calculate the results respectively:
As can be seen from the above figure, under the same circumstances, the average capital method will pay less total interest.
Well, some people may have questions. So, isn't it more cost-effective to choose the average capital method? Then why do more people choose the equal principal and interest method instead?
The basic principle of Marxist philosophy tells us: concrete analysis of specific problems!
There is not much difference between the average capital method and the equal principal and interest method in essence, just depending on everyone's current situation and needs. Therefore, it is very important to choose the appropriate repayment method.
To choose the appropriate repayment method, we must first consider the following points:
quality of life
At the beginning of repayment, the monthly repayment amount of the average capital method is relatively high, and the repayment pressure is greater than the equal principal and interest. Therefore, we should consider the individual's endurance. From the perspective of life, today's happiness is more important than the tens of thousands of dollars paid back, so people who pay more attention to the quality of life and happiness suggest reducing their pressure at the beginning of repayment;
Time value of money
The general way of funding means a higher "down payment"-a high amount of repayment in the early stage and a heavy burden in the early stage; Equal principal and interest have higher financial leverage, and larger assets are tilted with less money;
Do you want to prepay?
If repayment is made in advance, it is obviously more cost-effective to pay more principal and less interest expenses in the early stage of average capital;
Age at the beginning of repayment
If you are 40 years old, in the next ten years, with the growth of your age, your income will enter a declining range, and the repayment of the equal principal conforms to the changing law of the income curve. If your income curve goes up before the age of 20 and 40, there is no need to put too much pressure on yourself today.
The monthly repayment amount of equal principal and interest is the same, so it is more suitable for families with normal consumption plans, especially young people. Moreover, with the promotion of age or position, income will increase and living standards will naturally rise; If this kind of person chooses the principal method, the early pressure will be very great.
The average capital method is more suitable for lenders with strong repayment ability some time ago, because the repayment amount in the early stage is large, and then it decreases month by month. Of course, some older people are also more suitable for this way, because their income may decrease as they grow older or retire.