Loan depreciation plan: useful information

Overview of loan repayment plans

The definition of “amortization plan” means both a prospectus and a program according to which the requested loan must be repaid. The amortization plan of a personal loan, finalized or a loan always has the same characteristics, as it indicates the installments to be repaid, according to the various expiry dates agreed.

If an amortization plan is longer than 18 months, it generally refers to a medium-long term loan, while below this time horizon it is part of short-term loans, with a different impact especially on the payment of the substitute tax.

Types of loan repayment plans

There are 4 types of amortization, but as much as it is for mortgages, even in the case of personal loans the most used plan is the French depreciation plan, which is also the most economically expensive for those who have to repay a loan (with an interest share). decreasing and a growing capital share over time, for an installment that remains constant).

There are banks that sometimes offer repayment with the Italian amortization plan, which provides for the payment of installments with the same amount of principal and interest (with the compounding of the compounding of interest no longer applied). This is an exception, but if you can choose between this amortization plan and the French one, the first should always be preferred.

The importance of the amortization plan and the weight of the pre-amortization

The delivery of the document in which the amortization plan is reported has little significance when it comes to deciding on the convenience of the loan, also because it is difficult to evaluate. It is in fact preferable to refer to synthetic indicators such as Taeg and Tegm.

However, it may be useful to check that there are no interest-only installments for a more or less long period of time, which would lead to the application of a more or less prolonged financial amortization. The economic weight of the pre-amortization should never be underestimated, as in this period only interest is paid, which does not affect the capital reduction in any way, so, as can be understood from the name, the real start of the repayment, which will follow the amortization plan, it will take place when the pre-amortization period itself ends.