A variant of the construction financing is the deduction loan. In this case, the customer pays the bank an unchanged repayment installment and the interest due every month. The fact that the residual debt is reduced by the repayment installment also reduces interest payments. Also, the monthly pay installments are getting smaller and smaller. Those who use a repayment loan pay high installments at the beginning of their term , but can be certain that the monthly burden will continue to fall. Example: With a loan of 20,000 and a term of 5 years, an interest rate of 10 percent is agreed. The customer now has to pay a repayment installment of 4,000 and 2,000 euros interest in the first year. In the fifth year, however, in addition to the repayment of 4,000 euros only 400 euros interest due. Thus, the customer has a lower burden of about 1,600 euros last year.
Although repayment loans are offered for mortgage lending, this means for property conversions and additions, but rarely for real estate financing. Often, banks also offer these as consumer loans. Whether a repayment loan is cheaper than an annuity loan can usually be determined only by a credit calculation. For example, with a fixed maturity and an identical interest rate, a repayment loan may be cheaper than the annuity loan. With a loan amount of 12,000 euros, a term of 6 years and 8 percent interest savings around 214.71 euros. If a higher loan amount is taken, the difference between the two loans will be higher, so that a repayment loan often remains the cheaper loan. However, it must be assumed that the bank does not offer the same terms for both loans. In general, the fees for the installment loan are much higher than for the annuity loan, so the interest rates are higher. However, the choice of the loan does not only depend on the loan amount, because personal circumstances and financial conditions also play an important role. Not everyone is able to afford a high repayment installment plus interest at the beginning of the contract term, which effectively forces them to resort to the annuity loan. Especially when it comes to mortgage lending, every builder wants to be liquid in order to be able to pay off even unforeseen costs. Find out more at bankenonline.org.