From the perspective of total interest, it is more cost-effective to convert provident fund loans into average capital than equal principal and interest. Because the repayment amount of each installment of the two repayment methods is different, the principal of each installment is the same and the interest is different. The average capital in the first period is large, but the second period is small, and the total interest is less than the equal principal and interest, because the principal returned in the previous period is more.

The average monthly repayment amount of capital is different, showing a state of decreasing month by month. Matching principal and interest means the same monthly repayment amount. In essence, the proportion of principal increases month by month, the proportion of interest decreases month by month, and the monthly repayment amount remains unchanged.

Difference between average capital and equal principal and interest of provident fund loans

1. At present, there are two ways to repay the mortgage: average principal and equal principal and interest. Most citizens choose equal principal and interest. In fact, the two repayment methods of provident fund loans have their own advantages and disadvantages. The advantage of average capital's repayment method is that the overall interest paid is relatively small, but the disadvantage is that the pressure of prepayment is great. Citizens choose the repayment method that suits them according to their income.

2. The advantage of matching principal and interest is that the monthly repayment amount is relatively fixed, and the amount is not more or less, which is suitable for borrowers with relatively low income. But the disadvantage is also quite obvious, that is, to pay more interest. In addition, according to industry insiders, among the repayment methods of equal principal and interest, the monthly repayment amount in the early stage is less in principal and more in interest, which is not conducive to early repayment. According to their own situation, citizens can consider repaying loans in advance if they have sufficient funds.

3. The average capital is characterized by different monthly repayment amount, monthly repayment amount decreasing, total monthly principal/repayment months, and monthly interest rate. This calculation formula means that the principal returned by the lender will remain unchanged every month, while the interest will gradually decrease with the increase of repayment progress.