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What is a repayment schedule for a loan?
It is basically one where the payment schedule of the loan that we want to request is shown according to the amount and the term that we have chosen, that is, the table that allows us to calculate the loan installment. In this table, we can see different columns that will detail the information on the financing. On the one hand, we have the period, which will indicate the number of installments we are reimbursing, the amount of each installment, the percentage of interest we are paying in that monthly payment, the capital that we are returning in each installment and the remaining outstanding capital for returning after having paid each installment.
We can find this table both when calculating a loan in an online simulator or in the loan contract itself since all the details of when and how we will repay the financing we hire must be detailed.
Example of a repayment schedule of a credit
To see it more easily the following table is a table of repayment of a loan of 5,000 euros to repay in 12 months with an interest of 8% and no commission. This type of amortization that appears in the amortization table is called “French system” and we will explain it later.
|Number of months||Monthly fee||Amortized capital||Interest paid||Outstanding capital|
|0||€ 0||€ 0||€ 0||€ 5,000|
|1||€ 434.94||€ 401.61||33.33||€ 4,598.39|
|2||€ 434.94||€ 404.28||€ 30.66||€ 4,194.11|
|3||€ 434.94||€ 406.98||€ 27.96||€ 3,787.13|
|4||€ 434.94||€ 409.69||€ 25.25||€ 3,377.44|
|5||€ 434.94||€ 412.42||€ 22.52||€ 2,965.02|
|6||€ 434.94||€ 415.17||€ 19.77||€ 2,549.85|
|7||€ 434.94||€ 417.94||€ 17.00||€ 2,131.91|
|8||€ 434.94||€ 420.73||€ 14.21||€ 1,711.18|
|9||€ 434.94||€ 423.53||€ 11.41||€ 1,287.65|
|10||€ 434.94||€ 426.36||€ 8.58||€ 861.29|
|eleven||€ 434.94||€ 429.20||€ 5.74||€ 432.09|
|12||€ 434.97||€ 432.09||€ 2.88||€ 0|
Types of repayment of a loan
As we can see, in this table we will have all the relevant information on how to repay the loans, what installment we will pay and the percentages that we will devote to repay capital and pay interest.
To reimburse a consumer credit, it is normal that we do it in monthly installments. These monthly fees may be calculated in different ways. In our country there are two ways to amortize the credit that will define the way in which the amortization table is created:
- Amortization with French system: it is the most common form of repayment in personal loans in our country. With this amortization system, the installments are fixed although the percentages of what we pay to vary. At the beginning of the life of the loan, the percentage of interest will be higher and that of the capital reimbursed will be lower. These percentages will be reversed as we go through the reimbursement period. Thus, at the end of the term, we will be paying a higher percentage in the capital and practically nothing in interest.
- Amortization with German system: it is a form of reimbursement less common in Spain. With this type of amortization table, the repayment installments are higher at the beginning of the life of the loan and lower at the end. In this case, the fee has a fixed part of the capital to be repaid, but the interest is a percentage, so it will be higher at the beginning and lower at the end.
As we can see, depending on the reimbursement system used by the entity where we have applied for the loan, the installments to be paid will change and so will the amortization table. Likewise, the French system is still the most used by the entities that offer loans in Spain.
Calculate the amortization table of a loan
To calculate a repayment schedule for a loan we need a loan calculator since it is a complex calculation that can not be done by hand. The purpose of amortization tables is to know how much interest we will pay in total and how much interest will be generated. With the free calculator we can know these two factors (total cost and interest generated) according to the loan that we request, the term in which we want to reimburse it and the entity we go to:
How the term affects the repayment of a loan
Although it seems that they have no relationship, the term and the total interest that will be generated by the financing we hire are directly proportional. That is, the longer we take to repay the loan, the more interest will be generated. This is because interest accrues on the requested capital during the time in which we are reimbursing it. Thus, the longer the term, the more we will pay in total.
To see it more clearly we can check it in the following table, where with two loans of the same amount and interest its cost will be different simply by changing the months during which we will reimburse the financing:
|Quantity||€ 5,000||€ 5,000|
|Term||6 months||24 months|
|Share||€ 805 / month||€ 224 / month|
|Total interest generated||€ 102||€ 373|
As we can see when the term is longer the interest generated in total increases. The key to not overpaying is to choose the highest monthly payment that we can make considering our other financial obligations to shorten the maximum repayment term and, thus, cut interest accrued as much as possible.