To get started with annuity loans, I would like to give you a brief overview. Today, let’s take a closer look at the annuity loan, as it can be called. It should help you to be more familiar with the topic. Among other things, dealing with the costs, getting to know the application options and knowing the conditions when a loan can be granted and when not. There is also an insight into the possible uses and terms of the annuity loan. After reading the text, you can better imagine the matter of the annuity loan.
What is an annuity loan anyway?
An annuity loan is a special form of loan in which the borrower repays a certain loan amount to the bank at fixed intervals at fixed rates. These gaps are usually monthly loan installments, but can also be paid annually. How the borrower prefers it and what exactly the bank offers. This specific loan amount can be chosen freely by the borrower, depending on how much he needs to buy. It is also important that any incidental costs or additional costs are included in the loan amount. Otherwise the money is missing in the end, but the loan has already been applied for.
What is special about this is the amount of the rate. This is the same every month, except, of course, at the very last installment. Here, the customer only has to pay back the outstanding balance, which is usually below the normal rate. Then the loan would be repaid in full. A loan installment consists of a repayment (this is the amount of the loan repayment, since the loan must of course also be repaid) and the interest (which is fixed in advance for a certain time). The annuity is calculated by adding interest and repayment. The interest is fixed over the fixed commitment period. Since the annuity (the exact amount that I have to pay to the bank as a borrower) is always the same, our loan form is also called annuity loan.
So if I diligently repay my loan in monthly installments, for example, my loan amount will get smaller and smaller. This means that if my annuity is always the same, my interest rate drops too. This is because the interest is always calculated from the loan amount still available. The redemption calculation is annuity minus the interest. This means that the repayment always increases over the course of the loan period. Of course, this is not noticeable for me as a borrower, because I simply pay the same rate back to my bank.