Have you thought carefully about the most appropriate repayment schedule (interest payments from the balance of your loan or from the amount of the loan, repayment period et al.) for your income?
When you take out a loan it's important to know how the bank will calculate interest on it. This not only determines what your monthly repayments will be, but also how much the loan will end up costing you in the long run.
If you take out a loan using property as collateral, it's always a good idea to calculate how much interest you'll end up paying. For example, if your borrow €63,000 for 30 years, your monthly repayment will be just over €260, but you'll end up paying more than €32,000 in interest. Alternatively, if you reduce the repayment period to 20 years, your monthly repayments may be €85 higher, but your total interest is slashed to €20,400.
You can make your repayments using one of two schedules. Repayment on the basis of a fixed principal schedule means that your monthly payments are larger at first due to higher interest payments. These gradually decrease towards the end of the period of your loan, meaning lower monthly payments. Repayment on the basis of an annuity schedule means that your monthly payments are the same throughout the period of your loan, depending solely on changes in the interest rate. The term of a loan with an annuity schedule with fixed monthly payments becomes longer or shorter depending on changes in Euribor.
Interest payments on personal loans with no collateral
Example: loan of €1300, repayment period of 4 years, interest rate of 18%
Interest payments on balance of loan
|Repayment period 48 months
In the case of loans with property as collateral, the interest rate will be agreed with you when you enter into your agreement. It will comprise the base rate and your margin, which is calculated separately for every client. The interest rate on your loan will change over time as the base rate changes.
There are three options to choose from with the base rate