An annuity is a fixed loan payment that includes both principal and interest payments. It is found in both mortgages and consumer loans, and consists of the amortization (principal payment) and interest (the reward for lending the money).
What is an annuity payment?
An annuity is a repayment that consists of a component by which the debt is reduced and one on which you pay interest to the bank. The amount remains the same throughout the fixation period, but the ratio of the annuity to the interest varies. At the beginning, the interest prevails and gradually decreases.
Calculation of the annuity payment
The annuity payment, which is the most common way of repaying loans, can be easily and quickly calculated using an online loan calculator, or in the case of a mortgage loan, an online mortgage calculator.
What distinguishes an annuity loan payment?
Annuity repayment is mainly characterised by the fact that it has a fixed monthly repayment amount, only the ratio of principal and interest repayments changes during the repayment period.