Is this the first time you have to apply for a loan? Not sure how to calculate the actual cost of the loan, the number of installments, the interest? Don’t worry, read until the end and find out how, considering well what the loan amortization plan is, it is much easier than always making an assessment on the convenience of the loan.

Loan repayment plan

Loan repayment plan

The loan repayment plan is the program of the various phases of repayment of a loan received from a simple citizen or a requesting body. In fact, any loan includes, among its contractual provisions, a duration and an interest rate, which together determine the amount of periodic installments. In fact, those who receive a loan will have to repay not only the capital received, but also the interest earned on it. For this reason, having a clear idea of ​​the amortization plan is a very important condition to understand if the financing that you intend to request is really advantageous and sustainable.

The calculation of the installments of a loan can be made online on sites specialized in this type of transaction, which, among other results, often also offer the preparation of an amortization plan. Usually, just enter a few selected information about the loan, such as the duration, the interest rate and the rate of the installments (monthly, bi-monthly, quarterly or less frequent). The installment will in fact vary depending on how long the repayment period is spread (the longer the duration, the lower the amount of the installment) and the interest rate, fixed or variable.

Bond Loan

Bond Loan

Another type of amortization schedule on which information is often requested is that of a bond loan. In this case, for the private user the plan does not describe the reimbursement that he owes to a bank or a financial institution that has provided a loan, but the frequency of the return of the capital invested in the obligations of an institution.

In this case the reimbursement procedures, as well as the times and conditions (such as the interest rate), must be provided for in the regulation when the bonds are issued and indicated in the bond certificate. One of the most frequent repayment methods is called “French” or constant rate: this system establishes that the installment is constant and includes both a part of the capital to be repaid and a part of interest. Over time, the interest rate tends to fall, while that of capital increases.

In general, the loan amortization plan is a tool to be viewed preferably before signing any loan agreement, so as to have a clear idea of ​​the economic commitment that will have to be faced in the following months and years.