Interest on the loan: how not to allow yourself to cash in on yourself?

Many people are afraid to take out a loan because of high interest. However, it should be borne in mind that without a stock of knowledge in this area, even low interest on the loan can lead to serious losses.

For starters, let's look at the interest schemes that exist. It is customary to single out two main ones: standard (classical) and annuity. Both include the body of the loan and the interest itself.

Under the standard scheme, interest is constantly accrued on the loan balance. In fact, both interest on the loan and his body are reduced at the same time.

As for the annuity scheme, it is somewhat more complicated than usual. In this case, the borrower pays a fixed amount on a monthly basis. And the fact is that in the first half of the term, most of this amount is interest, and in the end - the body of the loan.

Which of these schemes is more profitable? Let's consider them in practice. And the first criterion, which is worth paying attention to, is the possibility of early repayment. For example, this month you need to pay $ 800 ($ 500 - body, and $ 300 - interest on the loan). If we are talking about the standard scheme, then, by depositing into the account not $ 800, but $ 900, next month you will be able to pay $ 100 less. Having the desire and opportunity, you will be able to repay the loan much earlier .

If you have chosen an annuity, then the possibility to pay the loan ahead of time is also present. However, this does not help you get rid of the need to pay interest. After all, the bulk of them you will have to pay it in the first months. In addition, there may be problems associated with the fact that banks are not particularly willing to take with the recalculation of the scheme.

The next point, which you should pay attention to, studying the interest on the loan and their profitability, is a commission. Do not expect that banks that offer higher rates, do not practically take money for maintenance. Very often, the availability of various commissions is learned after the conclusion of the contract. Of course, if you ask a direct question about this before the registration, you will get an honest answer. However, they seek to focus on the benefits of the proposal and to draw attention from its shortcomings. Including commissions. From this point of view it is more profitable to immediately pay a large one-time commission than to allow the bank for many years to extract interest from you for service.

Also, be sure to check how long it takes to make monthly payments. For example, if the grace period for bank terms is 45 days, this does not always mean that you can make the next payment within 45 days after the previous one. It is likely that it means the need to pay before the 15th day of each month. Then it will not matter, on the 1st or 31st you took a loan - until the 15th you have to make a payment.

Note! Accrual of interest on the loan brings profit to the bank. That is why the repayment of interest is for him in the first place. That is, if you do not have enough money to make a full monthly payment, interest on loans will be paid first, and the rest of the money will go to reduce the body. That is, the body will remain "hanging" in the same condition, and the bank will continue to charge penalties and fines on it.

Carefully read the terms of the loan agreement, and then you can avoid unnecessary costs and worries!