The principal and principal equivalents of repayments are two common ways of repaying loans. So what's more cost-effective? Analysis from multiple angles leads to conclusions。

What are the principal and principal repayments

First, from the point of view of total interest on repayments, the principal equivalent is more economical. Since the principal equivalent is fixed every month, interest on repayment is calculated on the basis of the remaining principal. As the repayment period progressed, the remaining principal was gradually reduced and interest was reduced. Thus, the total interest on repayment would be less in terms of the equivalent principal in relation to the principal。

Second, from the point of view of the repayment period, the principal equivalent is more economical. Equivalent principal is fixed at monthly repayments, including principal and interest. As interest is calculated on the basis of the residual principal, interest is relatively high in prior period payments and the remaining principal is reduced more slowly. The monthly repayments of the equivalent principal amount have been gradually reduced and the previous period was under greater pressure. For some borrowers with more limited financial resources, equivalent principals can reduce short-term repayment pressures and become more flexible。

Moreover, the equivalent principal is relatively more advantageous in terms of investment finance. It is assumed that two persons have borrowed the same amount and that the same funds are available. One chooses the same principal, one chooses the same principal. Equivalent principal payments are larger each month, allowing for early repayment of loans and interest savings. The monthly repayment of equivalents is small, and borrowers have more funds to invest and generate more revenue. Equivalent interest is therefore more attractive to borrowers with financial investment needs。

Finally, from the point of view of the psychological burden, the equilibria may be more cost-effective. The repayment of the equivalent principal is declining monthly and the upfront burden is heavier, and there may be some pressure on borrowers with tight short-term financial flows. The repayment of equivalent principal amounts is fixed, although the total interest is relatively high, but the repayment amounts are relatively stable and may have a lower psychological burden for some borrowers who are less mentally resilient。

In the light of the above, the principal and principal equivalents of repayments have their respective advantages and applicable scenarios. Equivalent principals are more economical in terms of total interest on repayments and, for borrowers, can alleviate repayment pressures. Equivalent principal, on the other hand, provides for a more stable repayment level in the short term, suitable for borrowers with a shortage of funds or investment needs. Thus, the choice of the repayment modality should be considered in the context of the individual ' s financial situation and needs。