First of all, we need to know what is average capital and what is equal principal and interest.
1, equal principal and interest, simply understood as repayment of the same amount of loans (including principal and interest) every month within the repayment period. As for the monthly repayment amount, the bank will have a formula. After calculating the formula, comprehensively calculate the interest generated by the time occupied by funds, and add the average principal to calculate the monthly repayment amount.
The calculation formula of equal principal and interest: monthly repayment amount = [loan principal × monthly interest rate ×( 1+ monthly interest rate) repayment months ]≤[( 1+ monthly interest rate) repayment months-1]. Because the calculation of equal principal and interest is complicated, I won't explain it too much here.
2, the average capital, the average capital is easier to understand, that is to say, the repayment of the principal is divided into months on average, the principal of each month is unchanged, and the interest is calculated according to the remaining principal of each month.
The calculation formula is as follows: monthly principal and interest repayment amount = (principal/repayment months)+(principal-accumulated repaid principal) × monthly interest rate.
How to choose average capital and equal principal and interest?
Specific how to choose, the following through an example to illustrate:
For example, a loan of 200,000 yuan from a bank with a repayment period of 20 years is calculated at the loan interest rate of 4.9%.
Choose the repayment method in average capital. The total loan interest is 98,408.33 yuan, the monthly repayment principal is 1 0,000 yuan, and the first month repayment interest is 650 yuan, and the total first month repayment is 1, 650 yuan. Due to the reduction of loan principal in the second month, the repayment interest will be lower than that in the first month, so the monthly payment in the second month will also be reduced.
If equal repayment of principal and interest is selected, the total loan interest is114133.14, and the monthly repayment amount is fixed at 1308.89 yuan.
Through the above calculation, we can see that there are differences between the repayment methods of average capital and equal principal and interest, resulting in different loan interest and monthly repayment amount. Under such circumstances, we need to choose the repayment method that suits us according to our actual economic situation.
If our monthly income is relatively high and our economy is relatively loose, then it is suggested that we can choose the repayment method in average capital. After all, the total loan interest generated by the same loan amount, loan term and loan interest rate will be less. However, if you choose this repayment method, the pressure of prepayment will be even greater.
If you don't want to pay too much pressure in advance, you can choose the repayment method of equal principal and interest. Although the total interest generated by choosing the repayment method of equal principal and interest will be higher, the repayment amount of each installment is the same, and the repayment of each installment in the early stage is less than the average capital, so the repayment pressure in the early stage will be relatively less.
It should be noted that when some banks apply for loans from us, they will choose the repayment method of equal principal and interest by default. If you want to choose the repayment method in average capital, remember to explain your needs to the bank when applying for a loan.
To sum up, average capital and equal principal and interest are two common repayment methods of bank loans. The interest generated by these two repayment methods is different, the monthly repayment amount is different, and the applicable people are also different. It is recommended to choose the repayment method that suits you according to your own situation.