Always, after confirming the financing proposal and knowing that the credit has been approved, the interested party will receive the contract with all the details of the transaction.
At this point, there is a specific system that is directly related to the way the benefits will be defined. Known as repayment of loans, it is a way for the institution to define the payment of installments.
Next, you’ll learn a little more about how this system works. Understand!
What is loan repayment?
As a rule, amortizing is the act of paying off the debt in parts, that is, it is that amount, without additional costs or interest, that we pay to settle what the institution has lent.
However, when we make a loan, in addition to the amount of debt, there are other expenses that make up the total monthly fees. So we still have to rely on this division of the collection of financing:
- main total value: it is the final amount of the installment, that is, it is the amortization plus costs, such as TAC (credit opening fee), IOF (tax on financial transactions), notary fees, interest, etc;
- interest: the percentage amount charged by the creditor to carry out the concession;
- debit balance is the sum of all installments, that is, the total of the operation.
What is the difference between amortization and refinancing?
Unlike amortization, where the installment can only be paid in cash, refinancing already offers more payment possibilities. In that circumstance, it is possible to apply for credit using an asset as collateral.
In the market, it is possible to find cases of refinancing that accept from real estate to vehicles. In this type of modality, the property remains in the name of the financial institution until the debt is paid. As the bank has this guarantee, it is common for interest rates to be lower, the term length and the amount released to be much higher.
The fees for this modality are divided into two:
- pre-fixed: this is a defined rate when the contract is closed. Its main feature is that it does not vary according to the time, so the customer knows how much he will play in the beginning;
- post-fixed: this usually tends to undergo monetary correction of market indices. In this case, the reference rate, IPCA or IGP-M may be responsible for determining its value.
Its peculiarity lies in the fact that its calculation always occurs at the close of the previous month. Thus, the installments change their amount periodically and there is no way of knowing what the interest will be.
What is Table Price and SAC?
In Brazil, it is customary to amortize loans and financing in two ways. One is the SAC (Constant Amortization System), and the other is the Price Table. Both have a common principle: reduction of the balance.
Thus, the debt is calculated up to the date of its amortization. After payment of the installment, the calculation is redone with interest on the remaining amount. That way, the charge always gets lower. However, despite this similarity, there are still some specific characteristics of each type. We will understand in more detail!
The Constant Amortization System is normally used to finance real estate. Therefore, the amortization is fixed, that is, the same amount is discounted every month – of course, except for the monetary correction that changes each month.
However, interest rates decrease over time and the final amount of installments is adjusted. In this way, the consumer pays more at the beginning and less at the end of the loan.
Take this opportunity!
Here, the installments do not vary as in SAC and all installments have the same value. What changes are amortization and interest? Thus, at Price, the amortized amount increases while interest decreases, but this does not affect the total value of the installment. This type of modality is more used in purchases of appliances and vehicles.
What are the benefits of loan repayment?
As the two types of amortization have different characteristics, it is important to think carefully which is the most advantageous for your situation. We will present the advantages and risks of each one. Understand!
1. Fixed amount
In the case of the Price Table, it has a fixed amount that can be paid monthly, since the only thing that changes is the interest and the amount of the amortization.
2. Without Market Influence
Here, Price again has an advantage, since it does not suffer from the fluctuations in economic indices. That is, its rate is post-fixed.
3. Longer deadlines
The Price Table is a type of amortization that offers longer terms, because as its installment is fixed, different from SAC, the consumer does not pay the highest amount at the beginning, obtaining more time to pay the installments.
4. Speed to pay off debt
This is one of the exclusive advantages of SAC, the big point here is that, as it decreases over time, the interested party already faces the worst part of the debt in the first months. So, with less time than the Price Table, he manages to repay the loan.
What are the amortization risks?
Greater uncertainty of payment compliance
Here, we are only talking about the Price Table. The consumer, having more time available, runs the risk of not having enough money to pay it off until the final period.
Periodic fluctuations of the parcel
This is a disadvantage of SAC, although it is faster, there is still the problem of variations that both amortization and interest suffer since it is influenced by the market.
How to choose the right system?
The principle for choosing which is best is to analyze what will harm your pocket least. Then, you must evaluate how long you intend to pay off this debt and if you are sure you will be able to pay during that period.
For example, as we highlighted in the previous topic, SAC has the characteristic of charging more at the beginning, but decreasing over time. Thus, it is more recommended for those who believe that they will have an increase in income, or for those who already have a large amount and are not sure if they will have the same conditions over time.
Now, in the case of Price, because it is more fixed and increases over time, it fits better for those who have a more solid financial situation and know that they will be able to afford this expense even for a long term – since the installments are smaller and interest rates that are high.
Well, we hope that with all this information, you have been able to understand how the loan repayment system works. Need to get financing? Don’t know who to turn to? Contact us. We have specific conditions for each situation and we still provide financing using an asset as collateral. Check out!