Repayment Loans
Amortization loan is the generic term in banking for loans for which a repayment payment is agreed over a fixed term . The debt service is then made up of the repayment installment and the interest calculated on the remaining debt at the agreed dates . The opposite is the bullet loan .
General
The compound “amortization loan” is not a technical term , but is used colloquially for loans that are to be repaid by the borrower during the loan period based on a repayment schedule. Are to be repaid all loans, but for the other types of loan repayment is either irregular ( overdraft , overdraft facility , Lombard credit , revolving credit and stand-by credit ) or in one lump sum at maturity instead (bullet loan).
species
Amortization loan is the generic term for installment loans and annuity loans , both of which are to be repaid on the basis of a repayment plan with regular repayment installments . The repayment schedule defines the repayment rhythm (monthly, quarterly, half-yearly or (rarely) yearly) and the repayment amount. With the installment loan, there are linear repayment installments with degressively falling interest rates, so that the annuity is also degressive. This is different with the annuity loan, because there is a constant annuity. Within this annuity, the interest portion falls in favor of the repayment portion.
Sample calculations
Repayment plan for an installment loan of 100,000 euros with an interest rate of 5.00% pa and a term of 5 years.
| year | Remaining debt | interest | Repayment | annual installment (interest + repayment) |
|---|---|---|---|---|
| 1 | € 100,000.00 | € 5,000.00 | € 20,000.00 | € 25,000.00 |
| 2 | € 80,000.00 | € 4,000.00 | € 20,000.00 | € 24,000.00 |
| 3 | € 60,000.00 | 3,000.00 € | € 20,000.00 | € 23,000.00 |
| 4th | € 40,000.00 | € 2,000.00 | € 20,000.00 | € 22,000.00 |
| 5 | € 20,000.00 | € 1,000.00 | € 20,000.00 | € 21,000.00 |
| to hum | € 15,000.00 | € 100,000.00 | 115,000.00 € |
Repayment plan for an installment loan of 100,000 euros with an interest rate of 5.00% pa and a monthly repayment of 500.00 euros.
| month | Remaining debt | interest | Repayment | monthly installment (interest + repayment) |
|---|---|---|---|---|
| 1 | € 100,000.00 | € 416.67 | € 500.00 | € 916.67 |
| 2 | € 99,500.00 | € 414.58 | € 500.00 | € 914.58 |
| 3 | € 99,000.00 | € 412.50 | € 500.00 | € 912.50 |
| 4th | € 98,500.00 | € 410.42 | € 500.00 | € 910.42 |
| 5 | € 98,000.00 | € 408.33 | € 500.00 | € 908.33 |
| 6th | € 97,500.00 | € 406.25 | € 500.00 | € 906.25 |
| ... | ... | ... | ... | ... |
| 199 | € 1,000.00 | € 4.17 | € 500.00 | € 504.17 |
| 200 | € 500.00 | € 2.08 | € 500.00 | € 502.08 |
| to hum | € 41,875 | € 100,000 | € 141,875 |
For comparison: With an annuity loan, you would have to agree a constant monthly rate of € 740 in order to repay the loan in the same time. There would be a total of around € 47,300 interest over the entire term of the loan, which would result in a total repayment amount of € 147,300.
comparison
An installment loan is characterized by monthly annuities that do not stay the same. This results in a decreasing monthly burden over the loan term. In contrast to an annuity loan, it is not the monthly installment (consisting of interest and repayment) that is agreed here, which then remains the same, but the monthly repayment. In addition, the interest is calculated on the remaining debt at this point in time.
An installment loan enables a faster residual debt reduction (repayment) in the first third of the loan term compared to an annuity loan, while with an annuity loan the repayment portion of the monthly installment at the end of the loan term increases.
Repayment plans for the three most common types of loan: Capital: 100,000 euros, interest rate: 5.00% pa, term: 5 years
| year | Remaining debt | interest | Repayment | rate |
|---|---|---|---|---|
| 1 | € 100,000 | € 5,000 | € 20,000 | € 25,000 |
| 2 | € 80,000 | € 4,000 | € 20,000 | € 24,000 |
| 3 | € 60,000 | € 3,000 | € 20,000 | € 23,000 |
| 4th | € 40,000 | € 2,000 | € 20,000 | € 22,000 |
| 5 | € 20,000 | € 1,000 | € 20,000 | € 21,000 |
| to hum | € 15,000 | € 100,000 | € 115,000 |
| year | Remaining debt | interest | Repayment | Annuity |
|---|---|---|---|---|
| 1 | € 100,000 | € 5,000 | € 18,097 | € 23,097 |
| 2 | € 81,903 | € 4,095 | € 19,002 | € 23,097 |
| 3 | € 62,901 | € 3,145 | € 19,952 | € 23,097 |
| 4th | € 42,949 | € 2,147 | € 20,950 | € 23,097 |
| 5 | € 22,000 | € 1,100 | € 22,000 | € 23,100 |
| to hum | € 15,488 | € 100,000 | € 115,488 |
| year | Remaining debt | interest | Repayment | rate |
|---|---|---|---|---|
| 1 | € 100,000 | € 5,000 | 0 € | € 5,000 |
| 2 | € 100,000 | € 5,000 | 0 € | € 5,000 |
| 3 | € 100,000 | € 5,000 | 0 € | € 5,000 |
| 4th | € 100,000 | € 5,000 | 0 € | € 5,000 |
| 5 | € 100,000 | € 5,000 | € 100,000 | € 105,000 |
| to hum | € 25,000 | € 100,000 | € 125,000 |