Before signing a loan contract it is very important to know the amount of the repayment installment. Calculating the installment of a loan in advance not only allows you to have a more precise idea of the feasibility of the transaction, but also to evaluate the convenience of the chosen formula. Through the calculation of the installment of the loan it is possible to understand if the amount of the installment is sustainable with respect to the current income, and above all reconcilable with all the other recurrent expenses.
Before contacting a credit institution it is important to define the amount you need and the duration of the loan contract, or in how many years you are willing to return the requested amount. Based on these two factors, the amount of the individual installments and their payment frequency will also be determined.
In addition to the sum of money required, when a loan is requested, other variables must be considered, that is all those items of expenditure that are taken into consideration when the loan is calculated. The main ones concern the interest rates of the loan, represented by the TAN (Annual Nominal Rate ) and by the APR (Effective Global Annual Rate). In fact, the amount of the loan repayment installment always consists of a share of capital, or the sum requested from the credit institution, and a share of interest. Here is what a loan’s interest rates are:
– the TAN represents the “pure” interest rate, or the fee requested by the bank to lend a sum of money for a certain period of time.
– The APR refers to the total cost of the loan on an annual basis, therefore it includes the TAN and all the ancillary costs necessary to obtain the loan, such as: preliminary investigation, opening and closing costs, insurance policies, government stamps and also default interest.
Attention: even the “zero rate” loans can include extra expenses in the calculation of the installment. For these types of financing the TAN will be zero but the APR could still have a weight, including all those expenses related to the management of the operation. For this reason it is always necessary to pay attention to both items, since they could also vary according to the chosen credit institution.
Given the wide offer of the credit market, in order to choose the most advantageous financing solution it is always necessary to compare the conditions provided by several financing solutions, including in the evaluation also the fast online Shreks, able to guarantee the payment of money even within 24 / 48 hours and in total safety.
The methods and timing of repayment of a loan will be indicated in the amortization plan. A document which will indicate the number of installments to be paid, the amount of each, their composition (ie the principal amount and the interest portion), the payment date and the residual debt for each maturity.
Most Italian credit institutions adopt a French amortization plan which provides for the payment of monthly installments with a constant amount – if the loan has a fixed rate – in which the interest rate initially prevails. In the course of financing, the part relating to interest will gradually be reduced in favor of the share of capital which will instead increase.
Almost all credit institutions adopt this repayment method to ensure the rapid recovery of interest already in the first part of the loan. The payment of the installments takes place in most cases through the automatic debit on the current account of the contract holder, however it is not excluded the possibility to make payments of installments also through postal bills. The frequency of the installments is in most cases monthly, but it is possible to request an amortization plan with quarterly and six-month maturities.
The fastest and most effective way to calculate the repayment rate of a loan involves the use of calculators for online financing, such as the one proposed by SuperMoney. By entering some information about the desired loan (amount, purpose, duration) and your own financial / credit situation, it will be possible to receive a free estimate of the loan in which will be indicated not only the amount of the installment, but also the main characteristics of the loan and the most advantageous credit institutions on the market.