Which is more cost-effective to repay in advance for 20 years or 10 years?

No matter which repayment method is used, it is the same for 10 years and 20 years, because the interest rate for loans over 5 years is Same. However, if you repay the loan early, you will certainly be able to pay less interest. However, early repayment involves the choice of repayment method.

If it is the equal principal repayment method, the principal must be returned in one lump sum for early repayment. Otherwise, the bank will repay the interest first, and the interest you should repay will be deducted from the money repaid in advance.

If you choose the equal principal repayment method, you do not need to repay the entire principal at once, because the monthly interest is not fixed and is calculated based on the loan balance of the month. You can repay part of it in advance. The principal and interest in the future can be much less until the principal is paid off. This repayment method is based on the principle that the principal is returned first. According to the actual operating situation, if it is the equal principal and interest repayment method and the one-time repayment is made in advance, the bank will only charge an amount equal to one month's interest as liquidated damages for early repayment.

Don’t choose equal principal and interest, because you said you can pay it off in advance in 7 or 8 years. I will explain the difference between the two for you below.

Of course, if you have enough repayment ability, 10 years will definitely be more cost-effective. Don’t listen to what the bank says. They definitely want you to take longer to process, so that the bank will make more money, right?

Extended information:

Advantages of the equal principal and interest repayment method:

1. The monthly repayment amount is equal, which makes it easier for the borrower to make decisions about future living expenses. Proper planning.

2. Compared with the equal principal repayment method, there is less pressure on early repayment.

3. There are no limitations in the choice of loan term, and the maximum term can be up to 10 years.

Disadvantages of the equal principal and interest repayment method:

1. The principal and interest need to be repaid every month, which is not as free as the one-time repayment of principal and interest.

2. Compared with equal amounts of principal, equal amounts of principal and interest have lighter initial repayment pressure, so loan interest will go in the opposite direction and increase. Taking a loan of RMB 300,000 with a one-year repayment period as an example, under the equal principal method, the total interest is only 50,325 yuan, while the equal principal and interest requires an additional payment of 2,709 yuan. And if the term is longer or the amount is larger, this gap will become more obvious, and vice versa.

2. Equal-amount principal repayment method

The advantages of the equal-amount principal repayment method:

1. There are more funds for monthly repayment in the early stage. When the occupancy rate is low, you can save yourself interest, which is the most economical of the two methods.

2. It has the same advantages as equal principal and interest, and can also be used as an option for users with a loan term within 10 years.

Disadvantages of the equal principal repayment method:

1. Just like the fast pace of urban life, since there are more funds to repay the loan at the beginning, you will be uncomfortable when you start to repay the loan. Consciousness lends a sense of urgency. If your ability to withstand stress is not strong, it is very likely that your wife will not be able to repay the loan in full and on time, resulting in the painful consequence that the overdue repayment record will be active on your credit report.

2. The monthly repayment figures are different and difficult to remember. You can only rely on the repayment list or text message reminders every month to ensure full repayment.