Amortization

Amortisation or repayment is the term used to describe the repayment of debts. There are different ways of paying off credit debts.

Annuity Repayment

With annuity repayment, the borrower pays the same instalment throughout the entire term. This is made up of a repayment portion and an interest portion. Since the remaining debt decreases with each repayment, the interest portion decreases after each payment in favour of the repayment portion. This type of repayment is available to all borrowers: both private individuals in the case of personal loans such as car loans or home loans, and self-employed persons and entrepreneurs in the case of a business loan.

Linear Repayments

With this type of repayment, the rate decreases after each amortisation payment as the remaining debt and the periodic interest decrease. Typically, interest is payable quarterly and amortisation annually.

Fixed Loan (Bullet Repayment)

With a fixed loan, also called a bullet repayment or bullet loan, the borrower only pays interest during the entire term. The repayment of the entire loan amount is due for repayment at the end of the term. This means that the periodic interest payments remain constant during the term.