The loan period is one of the most important determinants of any credit obligation. Why? Because of its length affects the overall cost of the loan, the amount of his monthly installments, and calculation of our creditworthiness. Selection of optimal long period of the loan should be a priority for every borrower. This is because the duration of the impact on our credit rating. The main assumption here is that the longer the period of loan, the proportion increases as the amount you can borrow. Her weaves decomposes because a greater number of months in which we will carry the liability.
The amount of installment
Increased number of installments affects the distribution of debt in the coming months, which makes itself at the same time decreasing installment credit, which reduced the value does not charge too much our monthly portfolio expenses. To illustrate this dependence we use the example of a mortgage loan in the amount of 200,000 zł, repaid in equal installments, of which the actual annual interest rate is 5.33%. The amount of the liability repaid installments for 240 months, which is exactly 20 years, 1342.11, respectively. If the length of the loan will be extended for another 10 years and will be 360 months, it will be exactly installment amounted to PLN 1,098.22. The difference in the amount of the monthly payments will be so 243.89, respectively.
Extending the period of the loan will make the other hand, that our debt will be repaid more slowly, and imposed by a financial institution interest rate will be levied on borrowed capital for additional months. This will result in considerable cost. To illustrate this relationship, and once again we use the example above mortgage. Although the two cases, borrowed the same amount (200,000 zł), the total amount to repay the loan amount to twenty years 322,105.94 zł, a thirty-year loan 395,359.83 zł. So if you make longer credit period of 20 to 30 years, the sum of the percentage increase of the value of 122,105.94 zł to the level of 195,359.83 zł. For the additional 10 years until 73,253.89 zł pay additional interest.
As shown in the above calculation, the extension of the credit period is advantageous if we have in mind the calculation of payments and our credit ratings. With a total firmness but it should be noted that the extension does not pay at all.