Concerning loans, there is a question that also troubles many home buyers, which is which repayment method to choose? In other words, which repayment method is more cost-effective?

As for the repayment methods, there are mainly two types, equal principal and interest and equal principal. We can judge the specific difference between the two through examples.

Assuming a loan of 1 million yuan with a term of 20 years, calculated based on the commercial loan interest rate of 4.9, the monthly repayment amount of equal principal and interest is the same, each period is 6544.44 yuan, but the proportion of interest repayment in the early period is It is greater than the principal; the first installment of equal principal repayment is 8,250 yuan, and the subsequent installment only requires 4,183.68 yuan, because the principal repayment in each installment is fixed and the interest is getting less and less. The text description may be difficult to understand, please look at the picture below.

From the picture above, we can see the difference between the two repayment methods. The main reason is that the proportion of principal and interest in the current period is different. Moreover, the initial repayment of equal principal and interest is mainly interest, while the principal repayment of equal principal is first.

Then why are there still many options for equal principal and interest? Probably because the repayment pressure of equal principal and interest is relatively small. For many working-class people, this method of repayment can ensure that they can buy a house without affecting the quality of life too much.

In addition, there is the question of whether the loan should be repaid in advance? This requires considering that everyone’s situation is different. Not everyone is suitable for repaying a loan early, but there are also some people who owe money that will make them very stressed. Mainly speaking, there are the following situations.

1. Equal amounts of principal are more suitable for early repayment of loans than equal amounts of principal and interest;

2. People with families or jobs who are highly dependent on cash are not suitable for early repayment of loans;

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3. If the monthly payment accounts for too high a proportion of the family’s monthly income, you can choose to repay the loan in advance;

4. If there are other channels with higher returns, there is no need to rush to repay the loan in advance;

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5. Personal personality and living habits also need to be taken into consideration;

Learning and understanding about home loans is a must for home buyers. Combining theory with practice can save home buyers money.