[Economics] Capital payment or advance installments. What is the best option with a loan?

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The situation always arose from the economic status and ability to pay of each individual.

View of dollar bills, in a file photograph. EFE/Sebastião Moreira

 

Each person, according to their financial status, may request a loan from a bank. This money can be used for some activity that you want to carry out, for example, the purchase of real estate.

It is important to understand the composition of these loan monthly payments: one part corresponds to the money that the bank or entity has lent you (the capital) and another part corresponds to the interest. There are two payment methods: fixed installments or adjustable installments; No matter what you probably choose on your loan, during the first months/years of the term, the part that is paid in interest is greater.

 

However, the process of buying a home can be complicated. "In capital installments, users can advance part of the money owed in an extraordinary way in the monthly payment, when they consider it convenient and it is within the reach of each debtor", explains the adviser Jonathan Malagón. In this way you will be able to pay the credit in less time than established and the interests will be lower.

pay to principal
The situation always arose from the economic status and ability to pay of each individual. Capital payments can be beneficial as you can save a lot of money on interest payments.

Prepayment

 

On the other hand, an advance payment of monthly payments is, what its name indicates, an advance payment of some installments. Credit conditions remain the same.

In a hypothetical case, a person can have a loan of USD 80,000 for 18 years and installments of 900. Seven months after receiving the loan, if they make a payment of USD 20,000 and change to lower the payment time, this pre-cancellation allows you to reduce the term to 10 years and, although the installment remained the same, in total, the member saved USD 12,000 in interest.

 

Link: https://www.eluniverso.com/noticias/economia/abono-al-capital-o-adelantar-cuotas-cual-es-la-mejor-opcion-con-un-credito-nota/