There are two options for repaying a loan: using annuity and differentiated payments. The lending market mainly offers banking products with annuity payments. Banks offer a differentiated interest calculation scheme only for long-term loans.
Features of differentiated payments
The differentiated payment scheme differs in that the amount of loan payments decreases towards the end of the lending period, that is, the main burden of the borrower falls on the initial lending period. With this scheme, each payment consists of two parts. The first part is the main payment or constant part, for the calculation of which the total loan amount is divided into equal parts. The second part is variable, that is, the amount of interest, while the interest is calculated on the balance of the debt.
Russian banks rarely offer differentiated payment loan products. Indeed, with such a scheme, banks are forced to impose increased requirements for the solvency of their client, since the client's ability to repay the loan is assessed on the basis of the first increased payments.
It is beneficial to use differentiated payments only when settling on long-term loan products.
It is beneficial to use differentiated payments only when settling on long-term loan products.
An example of calculating a differentiated payment
So, the differentiated payment includes two components.
The main payment is calculated using the following formula:
m = K / N, where
M - principal payment, K - loan amount, N - loan term.
Interest is charged on the balance of the debt, which is calculated using the formula:
Kn = K - (m * n), where
n is the number of periods that have already passed.
Then the variable part - the amount of interest, will be calculated as follows:
p = Kn * P / 12, where
p is the amount of interest accrued for the period, P is the annual interest rate, Kn is the balance of the debt at the beginning of each period.
The loan rate is divided by 12 because monthly payments are calculated.
The easiest way to understand what differentiated payments is using a calculated example. We will draw up a payment schedule for a loan in the amount of 150,000 rubles, the annual interest rate on the loan is 14%, and the loan term is 6 months.
The permanent part of the payment will be:
150000/6 = 25000.
Then the schedule of differentiated payments will look like this:
First payment: 25000 + 150000 * 0, 14/12 = 26750
Second payment: 25000 + (150000 - (25000 * 1)) * 0, 14/12 = 26458, 33
Third payment: 25000 + (150000 - (25000 * 2)) * 0.14/12 = 26166.66
Fourth payment: 25000 + (150000 - (25000 * 3)) * 0.14/12 = 25875
Fifth payment: 25000 + (150000 - (25000 * 4)) * 0, 14/12 = 25583, 33
Sixth month: 25000 + (150000 - (25000 * 5)) * 0.14/12 = 25291.67
Then the total amount of interest payments on the loan will be:
26750 + 26458, 33 + 26166, 66 + 25875 + 25583, 33 + 25291, 67 – 150000 = 6124, 99
