Choosing a loan program, the future borrower is obliged not only to choose a loan with a low interest rate and a convenient repayment period, but also to pay attention to the procedure for repaying the debt. It is imperative to find out the mechanism for calculating and writing off interest on the loan you like.
Borrowers who sign a loan agreement always pay attention to the main parameters of the loan: the interest rate and the term of the loan. However, it is equally important to clarify with the bank's specialists how interest on loans in this organization is calculated and written off.
Interest calculation procedure
Most loan agreements concluded today by borrowers involve an annuity scheme for calculating the amount of a monthly payment. The very formula for calculating the annuity is quite complicated, but its essence lies in the fact that first the full amount of interest is calculated that the borrower must pay to the bank for using the loan. Then this value is increased by the amount of the principal debt, then the resulting value is divided by the number of months of lending. During the term of the agreement, the borrower will make payments in equal monthly installments, but at first most of them are spent on paying off interest, and the “body” of the loan itself is decreasing very slowly.
If the loan agreement provides for a differentiated procedure for calculating interest, then the amount of the monthly payment will always be different. The bank's specialist calculates the amount of interest due to be paid every month and the part of the principal debt that must be repaid in the current period. With this method of accrual, the principal debt decreases faster, therefore, the amount of interest accrued on its balance will also be less. This is why differentiated payment loans are cheaper for borrowers than loans with annuity payments.
Priority of writing off loan payments
The procedure for writing off payments on credit debt is determined in Article 319 of the Civil Code of the Russian Federation. Based on its provisions, the amount of the debt to be repaid is distributed as follows: first, the creditor's costs of collecting the debt are reimbursed, then the interest on the loan is paid off, and only after that the principal debt is written off. That is why most of the annuity payment, especially in the first months of servicing the loan, is interest payments.
The borrower finds himself in a paradoxical situation: he regularly transfers money to the bank to repay the loan, but the amount of the principal debt practically does not decrease. If the borrower overestimated his strength, and the size of the annuity payment exceeds his financial capabilities, then sooner or later it will not be possible to avoid going into delay. Then the situation will become even more complicated. Now, in addition to interest payments and repayment of the principal debt, a negligent client will have to pay penalties and fines for late fulfillment of the terms of the loan agreement. Moreover, the order of repayment of claims will look like this: first, penalties and fines are written off, then interest, and only in the last place - the main debt.
