In the loan contract, which is concluded between the lender and the borrower, a monthly rate is agreed upon. The monthly rate consists of the monthly interest rate and the repayment to be paid, i.e. the amortisation of the loan.
During the term of the loan, the monthly rate remains the same, but its composition changes. The interest portion of the monthly instalment is reduced over the term in favour of the capital repayment.
Because the rate of amortisation is therefore slower at the beginning of the term, this means that if the personal loan is repaid early, the residual balance is often higher than the borrower expects. Due to this fact, the interest costs in the first years of the term are also higher than towards the end; and thus also the tax deductions.
With the LEND loan calculator, the borrower can easily calculate the monthly instalment for his loan and, by adjusting the loan amount and term, calculate the appropriate instalment.