If you take out a loan, you have the option of repaying and repaying it in various ways. One of these possibilities is the division into several payments, i.e. a partial payment that is always referred to as an instalment. Such instalments are usually payable monthly and are therefore also referred to as monthly instalments.
In other cases, however, instalments can also be paid annually or half-yearly.
Calculation of the monthly rate
The amount of the monthly instalment depends on the loan amount and the desired number of instalments or a desired term of the loan. To determine the monthly installment amount, the loan amount is then distributed over the respective installment quantity. In other words, the more installments agreed, the smaller the monthly installment. In addition to this monthly instalment and the repayment in general, interest is then calculated, which also depends on the term. The longer a sum of money is made available, the higher the interest will be, i.e. the interest will rise with the term and the total amount of all repayments will rise.
Design of the monthly rate
However, since lenders and borrowers can formulate loan and loan agreements very freely, the monthly rate can vary greatly. Some lenders, for example, calculate only the repayment in the monthly instalment and have the interest paid out in a single sum at the end of the term. Other lenders do it exactly the other way around and only allow themselves to pay the interest monthly and the full loan amount at the end of the term in one sum.
A lot is possible here via annual instalments, half-yearly instalments, special repayments or a mix of all possibilities.
Loans with constant or falling monthly rate
It is also possible that the monthly instalment at the beginning of the loan will be higher and at the end of the term it will always be or loans where the monthly charge has the same amount over the entire term of the loan. This depends on the type of contract, so either an annuity or an installment loan is agreed with the lender. This enables the contract to be individually adapted to the customer and his needs. Nevertheless, the credit business is now relatively standardised, so that fixed products of forms of credit are offered. The repayment must be made in a fixed and relatively inflexible manner; only the amount of the monthly instalment, the purchase period and the amount to be borrowed are variable in these products.
Unscheduled repayments or agreements deviating from this form are usually only granted for commercial purposes or for construction financing, as this is a higher mortgage lending value which also justifies such a correspondingly higher expenditure.
Amount of the monthly instalment
However, the basic rule for every customer is that the monthly rate is only set so high that it still leaves room for improvement. This means that planning should be as pessimistic as possible so that even unforeseeable events such as illness, salary cuts or temporary job loss do not lead to the monthly instalment no longer being able to be raised. Credit comparisons and credit calculators provide information on what monthly rate you should expect when and how high your maximum monthly charge should be. In construction financing in particular, you are best guided by the monthly rent and reserves you have to pay, which you can nevertheless build up as a result of this burden.