How Do I Choose the Best Loan Repayment Schedule?

Early repayment means that the borrower applies to the bank for repayment in advance, and guarantees that the previous month has not expired and the loan of the current month is repaid; according to the date set by the bank, all or part of the loan is repaid.

Repayment in advance

Early repayment is generally divided into two ways: partial repayment in advance and full repayment in advance .

Depending on the repayment method, the borrower can choose to reduce the amount by the term or by the amount. It is understood that most banks currently provide five ways to repay loans in advance for customers to choose from.
The first type is full repayment in advance, which means that the customer pays off all the remaining loans at one time. (No interest repayment, but interest paid is non-refundable)
The second type is partial repayment in advance, and the remaining loan keeps the monthly repayment amount unchanged, shortening the repayment period. (Save more interest)
The third type is partial repayment in advance. The remaining loan will reduce the monthly repayment amount and keep the repayment term unchanged. (Reduce the monthly supply burden, but the savings are lower than the second)
The fourth type is partial repayment in advance. The remaining loans will reduce the monthly repayment amount and shorten the repayment period. (Save more interest)
Fifth, the remaining principal of the loan remains unchanged, and only the repayment period is shortened. (Increased monthly payment, reduced some interest, but relatively uneconomical)
Financial experts suggest that in advance of repayment, the principal should be minimized, the term of the loan should be shortened, and the interest on the expenditure should be less ^[1]

How to handle early repayment, what are the requirements for early repayment?

First, the borrower must repay the principal and interest of the loan on a regular monthly basis for 6 months before they can propose to repay part or all of the loan for the first time in advance;

Secondly, for the serious loan management, the lenders set a minimum limit for repayment of some loans in advance, which generally needs more than 10,000 yuan;

The third is that the borrower generally needs to inform the lending institution 10 or 15 days in advance, and must submit the written information to the lending institution with the original loan contract, bank loan repayment savings card, monthly capital repayment interest statement, and my ID Apply and must be approved by them;

The fourth is that the borrower still needs to repay the fixed monthly loan principal and interest repayment amount in the current month, and at the same time deposit the loan amount that needs to be repaid in advance into the bank savings card ^[2]

Common ways

The repayment method refers to the way in which the borrower repays the principal and interest of the loan, and the interest is calculated based on the remaining principal of the borrower. Different repayment methods determine how quickly the principal is returned, which results in different total interest payments.

Equal principal and interest repayment method: the principal is increased monthly, the interest is decreased monthly, and the monthly repayment amount is unchanged;

Equal principal repayment method: the principal remains the same, the interest decreases month by month, and the monthly repayment amount decreases.

Compared with the two, in the case of the same loan term, amount and interest rate, at the initial stage of repayment, the equal principal repayment method will return the monthly amount greater than the equal principal and interest. However, based on the entire repayment period, the equal principal repayment method will save the loan interest expense.

Generally speaking, the equal principal repayment method is suitable for borrowers who have a certain economic foundation, can bear the pressure of large repayment in the early period, and have an early repayment plan. The equal principal and interest repayment method repays the same amount every month to facilitate the arrangement of income and expenditure. It is suitable for economic conditions. Borrowers who do not allow too much initial repayment investment and whose income is relatively stable ^[5]

First, you must ask for the repayment in advance

The borrower wants to repay the loan in advance, it must be more than half a year repayment, and even some banks require that the repayment has been more than one year. The bank generally requires the borrower to submit a written or telephone application 15 working days in advance. The bank must review and approve the application for the loan repayment in advance by the borrower, so it usually takes about one month. In addition, each bank has different requirements for early repayment. For example, some banks require that early repayment is an integer multiple of 10,000, and some banks need to collect a certain amount of liquidated damages ^[7]

1. Loan customers who enjoy CPF loans and 30% off interest rates do not have to rush to repay. Because the current 30% discount on the 5-year loan rate is lower than the 5-year deposit rate, it is more appropriate for customers to deposit the money in the bank than to repay the loan in advance. If such a customer repays the loan before buying a house in advance, the bank will implement the latest loan policy, the benchmark interest rate will rise by 1.1 times, and the borrower will lose more than it pays.

2. The equal principal and interest repayment has been over 5 years. Most of the early repayment of the loan is interest, and repayment in advance over 5 years. It can be said that the principal is more, so from the perspective of capital utilization, other investment channels can be considered. Channels where special annual yields exceed bank mortgage rates.

3. If the customer has other better investment and wealth management projects on hand such as stocks, funds, bonds, wealth management products, etc., or a business buyer and seller, they need liquid funds. If the investment yield is higher than the loan interest rate, there is no need to choose Repayment in advance ^[10] .