Loan Amortization Calculation: How Does it Work?

 

Calculating the amortization schedule of a loan and the amount of the individual installments before signing a loan contract makes it possible to assess the feasibility of the transaction. In fact, the amortization plan includes all the information relating to the methods and timing envisaged by the credit institution for returning the requested amount. The credit market offers different types of repayment plans, each with specific repayment methods.

Let’s see what there is to know about the subject, including all the information needed to calculate the loan repayment plan.

What is the loan repayment plan?

What is the loan repayment plan?

The amortization schedule defines the timing and methods with which the debt will be settled. By mutual agreement with the credit institution, you will be able to establish its duration and the percentage of interest, and consequently know the amount of the individual installments. In this regard, please note that each repayment installment consists of two distinct parts:

– the principal amount: which corresponds exactly to the money lent by the bank;

– the interest rate: relative to the amount of interest applied to the loan.

Depending on the depreciation plan chosen, the composition of the repayment installments may change. Once the contract is signed, you will then be bound to follow the loan repayment terms reported in the amortization schedule. Remember that you can decide the duration of the loan – and therefore the amortization plan – by changing the amount of the installments.

Obviously a shorter amortization plan will force you to pay more expensive installments; on the contrary, a longer repayment plan will provide for lighter installments. The choice of the duration of the repayment plan will depend on your financial situation, understood as the ability to reconcile the payment of the loan installments with all other recurring expenses.

Also remember that another key variable for the amount of the repayment installments will be the type of interest rates, whether fixed or variable. In the first case you will be sure to always pay the same amount for the duration of the contract. In the second case, instead, you will be exposed to the effects of fluctuations in the wholesale market.

The types of amortization schedule

The types of amortization schedule

The credit market provides for different types of amortization plans, but the most used in Italy is the so-called ” French depreciation”. This is a debt extinction program consisting of a first phase in which the installment is mainly composed of the share of interest, which will gradually be reduced, gradually increasing the principal amount.

In the final part of the contract the principal amount will represent most of the installment. Attention: the amount reimbursed each month will always be the same, only the ‘weight’ that the two components – interest share and principal amount – will have on the installment will change. With the French amortization plan, the creditor ensures that interest is repaid first and then the liquidity paid out.

Let’s try to give a concrete example: a loan of 30,000 euros to be repaid in 10 years, with installments every 6 months and an interest rate of 4%. The installments will therefore be 1,560 euros: 31,200 euros (30,000 plus 4% interest) divided by 20 installments (2 installments per year).

The first installment will consist of a six-month interest rate (2%) on the total capital to be repaid: (30,000 / 100) x 2 = 600 euros. All the rest of the installment will be capital share: 1.560 – 600 = 960 euros. The next installment will then be calculated on the residual capital remaining, therefore: 580.80 euros for the interest portion – (29.040 / 100) x 2 – and 979.20 euros for the interest portion (1.560 – 979.80). And so on, until the capital runs out.

What are the other types of amortization plans?

What are the other types of amortization plans?

There are also other types of amortization plans, less frequent on the Italian market:

  • variable rate amortization plan: the capital and interest shares can be redefined each time the rate changes; alternatively, only the interest rate can vary, while the capital share remains based on the original rate;
  • amortization plan in increasing or decreasing installments: the amount of the installments increases or decreases over the years based on a pre-established program;
  • free amortization plan: the interest rate is fixed, while the principal can be returned freely, even if within certain deadlines;
  • plan with fixed installment but variable rate and duration: the installment always corresponds to the same figure, but its composition changes with the interest rate. The duration then becomes variable in turn, until the debt is completely extinguished.

Take out a loan insurance? That’s when it’s best to do it

To face big expenses we often rely on the help of the banking institutions to which we ask for a loan. Before choosing it, however, it will be good to compare the best Gado Wetchworthhs on the market so that they can safely return the money.

Loan Insurance

Loan Insurance

Returning the loan sustainably means having installments that are in harmony with our monthly income and choosing one of Findomestic’s products or one of Compass’s products, for example, could make the difference.

Also because it happens very often that we find ourselves in difficulty in being regular with payments because with the economic instability that characterizes these years, losing one’s job is rather easy and frequent. And the ways to protect oneself are there, even when a bank loan is requested.

One of these is to ensure its own financing to cover any defaults in the payment of installments. There are two types of insurance coverage that we can choose: the first are the CPI, or Credit Protection Insurance, the second, on the other hand, are ancillary policies.

Both have a cost and are paid either in a lump sum at the start of the loan, or spread in installments together with the monthly loan installment. Both, therefore, make an increase in the installments to be paid but the security they offer is undoubted.

These, in fact, if we had problems with the repayment of the loan could cover all or part of the remaining debt: the causes they cover are those related to reasons such as loss of work, illness, disability or death.

It is certainly worthwhile to stipulate them when large sums of money are required: first of all because their cost can be spread very softly in installments that already have their own weight, secondly because it is more reasonable to ensure Gado Wetchworthh highs than small loans.

Normally they are optional, except in the case where you have not chosen to return the loan with salary assignment: in this case, in fact, for debits from your monthly salary, an insurance is required that protects the bank from life and risk risks employment.

The difference between CPI covers and ancillary policies lies in the fact that the former intervene to repay the installments on behalf of the client (totally or partially). On the contrary, the latter allow the customer to skip the payment of the installments for the period of time in which he is in difficulty.

How to pay student loans with low interest credit cards

In November 2011, CNN reported that students who graduated from college last year did so with a record level of student debt – $ 25, 250 per graduate.

What is more worrying is that this number is an average, which means that while some student’s debt has remained below this amount, many carry the debt well over $ 25,000 – some up to $ 100,000 or even loans to the students. What’s worse is that many former students with student loan debt have never even received a diploma.

There is no easy way to pay student loans, despite the ease with which this debt can mature. However, there is a strategy to attack school loans that you may not have taken into consideration and that can make things a little easier: credit card transfers with low interest.

The balance transfer introductory APR involves risks, but if you keep good records, pay your bills on time and get a good credit score, you might be able to repay student loans much faster by using credit cards. However, there are a number of variables to consider before determining if this is the right method for you.

Low interest credit cards to eliminate student loan debt

Low interest credit cards to eliminate student loan debt

1. Are you a good candidate for low-interest budget transfers?

If you have a solid credit score, you could be a good candidate for low-interest balance transfers. To keep your credit score as high as possible, access your free credit report regularly and check it for inaccuracies. Also, establish credit lines as soon as possible, but be careful that you only import minimum amounts each month and pay them in full in each billing cycle. The longer you have used credit responsibly, the better your score.

Practicing good tax habits over a long period of time is the best way to improve your credit score. Good financial habits include paying bills on time, without ever exceeding 50% of the credit limit and maintaining modest expenses.

2. Which loans should you transfer to a credit card?

The transfer of loans is not necessarily as simple as it seems. Even if a lower interest rate is what you are at the end, make sure you don’t give up valuable benefits by transferring certain loans to students.

Give priority to loans with higher interest rates
When choosing the loans to be transferred to a credit card, do not automatically select the loans with the highest balances. The strategy works best when targeting smaller loans subject to higher interest rates. By using this strategy, you can accelerate your earnings because most of your money will go towards the principles and less towards the interest.

Avoid the transfer of government loans
In general, you do not want to use balance transfers with low-interest credit cards for government-subsidized student loans. Instead, save the balance transfer strategy for loans from private banks.

Government loans are equipped with all kinds of integrated ways to suspend, settle, postpone or otherwise reduce payments. These are tricks to have available if necessary. Once you transfer a government loan to a low APR credit card, you lose these benefits. The ability to accelerate the payment of the loan by reducing the interest could be increased, but the risk also increases.

3. How much should you transfer?

Whatever you do, don’t transfer more than you can pay within the low APR introductory period. It is in your best interest to start small.

You will probably not receive enough offers to facilitate the transfer of the entire credit balance of the student loan to credit cards with low interest rates at once – especially if you have just graduated. Instead, choose a smaller high-interest loan to target first. Then concentrate all your energy towards paying that loan before the introductory rate expires.

There are three reasons to use this method:

  1. This is the best way to make more progress on each loan.
  2. You will benefit from practice and experience before biting a bigger piece the next time you transfer a balance.
  3. It will provide time to increase your credit score.

Remember, if you can responsibly use a balance transfer by paying on time, your credit score will increase and in the future you will have even more low-interest offers with higher credit limits.

4. How do you rate a good transfer offer?

A lower interest rate does not automatically mean that a balance transfer offer is “good”. It is also necessary to consider the impact of the balance transfer fees and the duration of the introductory APR. Remember, it is necessary to plan the payment of the entire balance of the loan transferred within the introductory period; otherwise the interest rate on your loan could skyrocket compared to what you were paying before the transfer.

Interest and term

How do you rate what is “low interest”? Clearly, the lower the better, right? This is true; however, it is also necessary to take into account the length of the term.

For example, a balance transfer offer of 2% of RAP for 12 months could be better than an April offer of 6 months, 0%. I recently saw an offer to block a balance transfer of 3% APR for five years. This could be a great deal for someone who is paying student loans with an interest rate of 8% or 9%.

Low interest can mean any rate lower than the current rate. However, I do not recommend this strategy unless you are lowering your rate by at least four points. Remember, if you can’t pay or transfer the entire balance at the end of the introductory period, this strategy won’t help you at all. It might be better to keep the loans exactly where they are.

tax
Always remember to examine the fees. Almost all balance transfer offers are accompanied by a commission based on a percentage of the loan, which must be calculated in the cost of the loan.

Treat the tax as if it were interest for the first 12 months of the balance transfer. For example, a 12-month APR transfer with a 3% commission means that, in essence, you will pay a 3% APR, a good deal in most cases. However, this is why I do not recommend 6-month balance transfers, because commissions on a 6-month transfer are usually the same as commissions on a 12-month balance transfer. A 3% commission on a 6 month balance transfer means that you are actually paying a 6% annual rate and probably not worth it.

5. Are balance transfers in low APR at risk?

Balance transfers in low APR effectively carry risks. It is extremely important to remember that while there are balance transfer offers that allow you to lock in a low interest rate for the duration of the loan, in most cases these are temporary rates. These are the rates that expire after a short period of time.

Make sure you make plans to pay off the loan balance (or transfer it to another card) before the introductory APR expires. If you leave a balance on the card at the end of the pricing period, it will trigger a much higher interest rate that could make you borrow deeper and make your situation worse.

Low rate balance transfer offers come and go, so there is no guarantee that a new offer will be available to you at the end of the introductory period. Because of these risks, the strategy of using low interest balance transfer offers the possibility to repay school loans should be undertaken with caution and caution.

Final word

Final word

I personally used this strategy to manage large debts, and I know others who paid large credit balances using the introductory balance transfer offers. However it is not always an easy plan to execute. The use of introductory balance transfers to reduce school loans requires active participation on the part of the user, good storage capacity and timely payments. If you have high interest school loans and the ability to manage your money well, balance transfers could be an extra weapon in your debt reduction arsenal.

Did you use low-interest credit card balance transfers to manage student loan debt or to pay other large credit balances?

15 Ideas and tips for winter stays – Staying at home for the holidays

If you are like me, you are probably dreaming of the sun, sandy beaches or just going outside without being attacked by an air so cold that it hurts your teeth. Yes, it is again at that time of the year, when many people begin to fantasize about finally taking that tropical vacation…

Responsible for the qualifications for the status of family clerk with respect to the IRS tax declaration for single parents

Restarting life after divorce as a new single parent can really take its toll on you emotionally, mentally and financially. Similarly, having a child with someone you have never married and with whom you no longer have a relationship can be just as difficult. If you find yourself in one of these situations, the status of your tax filing is probably one of the last things you have in mind. Anyway

Non-repayable loans, farms thank the Lombardy Region

Small Business Loan

Small Business Loan

If you have a small business to run, you know for sure how difficult it is to get a loan in these “credit crunch” times. However, it is possible to find an advantageous loan by first comparing the offers of the various credit institutions. And if you own agricultural un’aziende and you qualify to request them, the Lombardy Region provides funding grant of up to 15,000 Euros just to agricultural enterprises; to take part in the announcement there is time until September 30, 2014 and it is an opportunity that in times of “lean cows” you can certainly not miss.

For those who could not or would not be able to access non-repayable loans for farms, there is always the loan route: compare the offers of Acreditorse, FER, Astrofinance, Prescrediteria, etc. on the web will help you find the solution best suited to your finances. But back to us. The grants from the Lombardy Region fall under Measure 112 of the 2007-2013 Rural Development Program, or the “Settlement of young farmers”.

The tender will distribute up to € 15,000 for farms in less favored mountain areas and up to € 10,000 for all other areas. To access non -repayable loans, it will be necessary to comply with the following requirements : the company owner must be aged between 18 and 40 and have exercised, for at least 2 years, an agricultural activity in an areal enterprise as a family adjuvant or agricultural worker, or having obtained a degree (university or secondary school) related to the agrarian-zootechnical field.

The applicant must then present a Business Plan on the present state of the farm and on the future development of the activity; this plan must be accompanied by a positive prior opinion on the financial sustainability of the investment, expressed by a Nemidy operating in the agricultural sector or by a bank. Furthermore, this will have to be the first time that the farmer will manage, as owner, an individual company, an agricultural or cooperative society.

The plans will then be evaluated on the basis of some parameters : certainly the characteristics of the interventions, derived from the Business Plan; the productive sector affected by the interventions will also be important, the type of intervention proposed and the territorial area of ‚Äč‚Äčimplementation, the characteristics of the company or company in which the settlement takes place and, finally, its consistency with the provincial planning.

Applications for non -repayable loans, as we have already said, must be received by 30 September 2014 at the offices of the Lombardy province in which the farm intends to settle. For all the additional information we recommend the careful reading of the notice that contains all the requirements in detail and also the methods for presenting the application.

Get a payday loan without payroll, the three options available

Payday loan without payroll

Loan without payroll

Christmas is getting closer and closer, and city traffic is increasing due to the frantic search for gifts and thoughts for friends and family. The city center is full of scents and colors, as well as of people submerged in bags. But there are those who have some economic problems and who need a loan when it comes to giving gifts. But we must not despair: just put The Alvings of the best lenders in comparison to find the one that best suits your needs.

If you decide to find out about Astrofinance, Crediter, Dynacredit and Cleopar, for example, you can get an overview of current market proposals. Collecting all the necessary information before making your choice is also essential for those who want to get a loan without a paycheck, because, no matter how complicated it may be to find one, it is not impossible, indeed. Let’s see in detail what needs to be done.

First of all, if you want to get a loan without a pay slip you must be sure of being able to pay all the loan installments, otherwise you will be considered bad payers, you will be enrolled in the SIC (Credit Information Systems), and you will no longer be able to obtain The Alvings for a certain period of time. If you do not have a permanent employment contract, if you do not have a job, if you are a professional or self-employed with low income, temporary workers or atypical workers, you can follow three steps to get a loan without a paycheck.

A guarantor can be found, who in the event of default in the balance of the installments becomes the subject to whom the bank or credit institution addresses. The guarantor can be any private person who has regular payroll, but also a pensioner or a freelancer. Another street is the mortgage of the house: if you own an apartment, a house or a building, you can mortgage your property, which will be assessed by the bank. In the event of non-compliance, by law, the credit institution can take action against it.

But there is another way to get a loan without a pay slip: just show the bank you have a regular monthly income, for example coming from a lease, which allows you to support the loan installments. This income serves to the lender as a guarantee of the fact that whoever requests it can support it without problems.