The most important question for home buyers is how to repay the loan and what would be more conducive to the return of the principal. Let us take a more professional and comprehensible approach to in-depth research and analysis of this issue。

Which way do you repay the principal

** First, we know how to repay “equivalent interest”**。

Under this model, as its name indicates, you repay the same amount per month for the entire loan term. The total consists of an equal share of principal and interest. However, there is a delicate distribution of this equivalent. In the early days of the loan, you repay the principal amount of the loan relatively little, so most of the money is used to pay interest. However, as time moves forward, the principal share of your progressive repayment will gradually increase and interest on each repayment will decrease over the period. This means that you will have more money to repay the principal, which means that the “Equal principal” mode of repayment will eventually result in more principal than the “Equivalent Principal” total。

** Next, let's look at the repayment of the “Equal principal”**。

As its name points out, the amount of principal you repay every month during the loan period is fixed. However, since the principal amount that you repay each month is fixed, the monthly interest will vary. In the early years of the loan, the repayment would be relatively high because of the higher principal. On the contrary, since the principal amount is equal every time you repay it, the interest payable per month is gradually reduced. So, as you repay the same principal amount on a continuous basis every month, the total amount of the loan will decrease. This means that the repayment in the prior period would be more favourable to the principal, under which the amount of the final repayment would be more than the equivalent。

** Mention should be made of the question of advance payment**。

Usually, the bank decides whether you need to pay the default, depending on the time you pay in advance. Usually, if you have a loan term of less than one year, you are prepared to pay a certain amount of default money. But if your loan is longer than one year, then you may not have to pay the default, although some bank regulations may require you to pay a percentage of the amount paid in advance. Therefore, the requirement for early repayment of the loan is largely dependent on the provisions of the lending institution。