Annuity

In a loan with annuity amortisation, the periodic payments are equal. Typically, the payments are due monthly. These constant monthly instalments are made up of an interest portion and a repayment portion. The repayment is progressive, i.e. the repayment portion increases over time and the interest portion decreases.

The advantage of this type of repayment for the borrower is that it is easy to plan, because the periodic instalment always remains the same. Annuity repayment is often used for personal loans. It is also often prescribed by law, for example for consumer loans.