Present value of annuity

Annuity: loan cost calculation
When purchasing goods or other property on installments, the consumer most often turns to a bank. Standard offers for loan repayment – annuity, the cost of which can be calculated independently using an online calculator. This is important for determining the loan term.

Annuity: loan cost, repayment terms

Annuity – these are equal payments over a certain period at regular intervals. In reality, the process can be described as follows:
• the borrower takes a certain amount from the bank;
• the loan term is agreed upon;
• the bank calculates the total interest for the entire period, according to the annual rate;
• interest and the principal amount are summed up and divided by the number of months during which the borrower will use the money.

This is the annuity payment amount. Banks allow early repayment without imposing penalties. The consumer should know that in the case of an annuity repayment scheme, the interest amount is initially set for the agreed period, so early repayment does not reduce the loan cost.

The only advantage – is relief from financial burden. Therefore, it is worth using an online calculator to find out the annuity cost in advance. How profitable this is, is up to the consumer.