When we must take a pre-test, the first one that is recommended is to look at the amortization system that this will present.
In this way, you will know if you will pay more interest in the beginning of the life of the credit, the good will be paid for during your term.
For those that do not in the second, amortization denominates to each paid that is realized to pay the debt until the end of the agreed plaza.
Capital and corresponding interests
In this way, each amortization quota includes capital and corresponding interests.
Usually there is a repayment of capital and in this case it refers to the payment of the part of the capital that makes up the quota.
As we know, there are different amortization systems, but now we will focus on the French system which consists of amortization through a constant rate of “n” terms.
Its main feature lies in the amortization rate
Which is the same for the whole period of the loan, in credits to be paid.
Capital is amortized in an increasing manner, although interest is calculated on the balance, for which reason it is decreasing.
This amortization system is more widespread among banks, and is usually associated with a lower rate than credit with the German amortization system.
It is also known as progressive, because as long as it passes through the quotas destined for the amortization of the capital being larger, it will be clear that the outstanding capital will be diminishing.
Example of amortization of a preview with French system:
Annuality: The annuality is calculated by the formula:
- ? = (1 + i) n. i
- (1 + i) n – 1
Hence “i” is the interest and “n” is the number of years to pay.
As an example, we will consider the amortization rate of 35,000,000 pre-payable amortization weight in 5 years and with an interest of 14%.
First is the annuality and multiplies by the total of the amount, only as to obtain the amount to pay each year:
- Λ = (1 + i) n. i = (1 + 0.14) 5. 0’14 = 0’269558041 = 0’291283546
- (1 + i) n – 1 (1 + 0’14) 5 – 1 0’925414582
- Annuity = 0.291283546. 35,000,000 = 10,194,924
Due to the fact that we have obtained the weight of 3 pesos, we proceed to the increase and increase of the number of songs where it corresponds. Generally, this operation is carried out in the last year before the last (in this example, in the fourth year).