Many people are afraid to borrow because of high interest rates. However, it should be borne in mind that without sufficient knowledge in this area, low interest in the loan can lead to serious losses.
Interest on the loan
First, let’s look at what there are interest schemes. It is usual to distinguish two main ones: standard (classical) and annuity. Both include the loan body and interest itself.
According to the standard scheme, interest on the loan balance is constantly increasing. In fact, both the loan interest and her body are reduced at the same time.
When it comes to the annuity system, it is somewhat more difficult than usual. In this case, the borrower pays a fixed amount each month. And the end result is that in the first half of the period most of this amount is interest, and in the end – the body of the loan.
Which of these programs is more advantageous? Consider them in practice. The first criterion to note is the possibility of early repayment. For example, you have to pay $ 800 this month ($ 500 is the body and $ 300 is the interest on the loan). Speaking of the standard scheme, after you deposit not $ 800 but $ 900, you can pay $ 100 less next month. With desire and opportunity you will be able to repay the loan much sooner.
The opportunity to repay the loan in advance also present
However, this will not help you get rid of having to pay interest. After all, you have to pay the bulk of them in the first few months. In addition, there may be problems related to the fact that banks are not very willing to fiddle with the system recalculation.
Another item you should look at, pay attention to, and study the interest in the loan is its commission. You should not expect that banks offering higher rates practically do not take money for service. The existence of various commissions will very often be recognized after the conclusion of the contract. Of course, if you put a direct question to employees before processing, you will get a sincere answer. However, they tend to focus on the advantages of the proposal and divert attention from its disadvantages. Including commissions. In this respect, it is better to pay a large one-off commission immediately than to allow the bank to draw interest from you for many years.
Also, be sure to sign in. How long should monthly payments be made? For example, if your grace period is 45 days under the terms of your bank, it doesn’t always mean that you can make another payment up to 45 days after the previous one. It is likely that this means paying by the 15th of each month. It doesn’t matter if you borrowed the 1st or 31st loan – you must make a payment before the 15th payment.
Increase in loan interest brings profit to the bank
Therefore, paying interest to him comes first. This means that if you do not have enough money to make a full monthly payment, the loan interest will first be paid and the rest of the money will be spent on body reduction. This means that the body will remain “hanging” in the same condition and the bank will continue to charge fines and fines.
Carefully read the terms of the loan agreement and then avoid unnecessary expenses and worries!