REPAYMENT LOANS: LESSER RISK TO LENDERS AND BORROWERS

2007-04-17 04:46:40

( Financial )



Repayment loans: Equal amount of loan amortizations

Repayment loans are also known as annuity loans where the amount of loan installment is comprised by the amount of principal and interest payments. The amount of loan will gradually be paid off in an equal and steady pace by the regular amortization payments. The amount of interest charged to the loan will also gradually decrease after every amortization.

Benefits of Repayment Loans

Borrowers benefit from repayment loans if they consistently pay off their loan amortization. They can even finish paying the loan earlier at a stable pace using repayment loans. The loan can also be repaid at the end of the agreed loan term.

Easier Remortgage

Remortgaging will be much easier when borrowers are paying their former loans through repayment mortgage scheme. A few balances on their first loans will make it easier for them to pay it off in bulk before they avail of remortgage. They can have the option to pay off the balance of their first loan from the proceeds of Remortgaging. It will not entail any cash outlay on their part thereby saving them any cost.

Regular Generation of Funds for Lenders

Repayment loans are also preferred by lenders since it consistently return their capital at a stable pace thereby allowing them to generate funds to relent to their borrowers. It actually lessens the risk lenders face in providing loans. Lenders set aside a percentage of their loan portfolio to be at risk of not being recovered. Repayment loans, in a way, lessen that risk.

Affordable Amortization

Borrowers who are assured of a steady income to cover repayment loans are better paying off their loans at a consistent fixed amount every month or every quarter. Their income can very well shoulder regular loan payments than opting for a loan with large sporadic payment.

Borrowers should weigh their financial capacity when deciding what option to choose in paying their loans. Those with fixed regular income can benefit using repayment loans. A repayment calculator can be used to help borrowers know the amount of repayments they will pay for their loan requirements.


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