How to read the repayment table of a loan?

How to read the repayment table of a loan?

 

The repayment schedule of a loan is a table that represents how the debt we have with the bank is evolving over time. Although the truth is that there are different ways to repay or return the money that the bank or loan company has lent us, in Spain the French method is mostly followed.

All the payments that we have

All the payments that we have

Thus, the amortization table is a kind of summary in which all the payments that we have to make during the existence of the loan to the bank or credit institution in question appear. In addition, the interest to be paid, the repayment of the principal loan or the outstanding debt at each specific moment will appear in the amortization table.

Content of the amortization table and how it should be interpreted

Content of the amortization table and how it should be interpreted

 

The amortization table is usually formed by five different columns relative to the following five extremes:

  1. Period: normally placed in the first column, the period refers to the period in which the borrower has to make the payment.
  2. Interest: placed in the second column, this refers to the interests that the borrower is obliged to pay to the bank or credit institution in each specific period. Thus, it is necessary that the interest be calculated by multiplying the interest rate agreed by the outstanding capital. For example, if the outstanding debt for the specific period is 2,000 euros and at the time we agreed with the bank an interest of 6%, we will have to pay interest of 120 euros.
  3. Amortization of capital: located in the third column, this end refers to the repayment of the loan without taking into account interest.
  4. Fee: located in the fourth column, the fee consists of the sum of interest and repayment, that is, the total amount that the borrower has to pay the bank.
  5. Capital pending amortization: in the fifth column is the capital that is still pending amortization, that is, the amount resulting from subtracting in each period the outstanding capital of the previous period and the amortization of the current period. That is, if we have subscribed a loan of 12,000 euros and the repayment is 1,000 euros in each period, in period 3 we will have already paid 3,000 euros, so the outstanding capital will be 9,000 euros, that is, 12,000 euros minus 3,000 Euros

In any case, it must be taken into account that the amortization table faithfully reflects the situation in the loans of fixed mortgages, but in the case of variable mortgages, it is only a simulation. This is so because interest changes with the fluctuations of the index in question and the amortization table can only make an estimate or forecast of payments.

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Undoubtedly, it is best to opt for a comparator of financial products that lend us a hand in these needs and guide us to find the loan that best suits us.

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