Average capital refers to a loan repayment method, and its related contents are as follows:

1. Equal principal repayment plan distributes the loan principal evenly in each repayment cycle, and the borrower needs to pay the same principal amount, but with the passage of time, the interest amount paid each time decreases gradually because the unpaid principal decreases. This gradually reduces the total repayment amount.

2. The advantage of average capital repayment method is that the borrower gradually reduces the loan principal during the repayment period, so the overall interest paid is less. But in the early days, due to the large loan balance, borrowers need to pay higher interest. As time goes on, the interest on each repayment gradually decreases. Suitable for people who want to pay off the loan as soon as possible and reduce the total interest payment.

The main difference between average capital and equal principal and interest

1. In average capital repayment method, the borrower needs to pay the same principal amount in each repayment period, which is the result of dividing the total loan amount by the number of repayment periods. So the principal part of each repayment is fixed. Because the principal is partially fixed, the outstanding principal decreases after each repayment cycle, resulting in a gradual decrease in interest paid each time.

2. The total repayment amount of average capital is the sum of the principal part plus the interest paid in all repayment periods. Borrowers generally pay less interest during the repayment period. The repayment period is usually short, because with the passage of time, the outstanding principal decreases and the loan can be paid off more quickly.

3. In the equal principal and interest repayment method, the borrower needs to pay the same total repayment amount in each repayment period, including principal and interest. The principal part of each repayment gradually increases, and the interest part gradually decreases. Because the outstanding principal decreases slowly after each repayment cycle, the amount of interest paid each time is higher at the beginning of the repayment cycle.

4. The total repayment amount of equal principal and interest is the sum of the total loan amount plus the interest paid in all repayment cycles. Borrowers generally pay more interest during the repayment period. The repayment period is usually longer, because each repayment contains the same total repayment amount, and the outstanding principal decreases relatively slowly.