Average capital is also called unequal interest repayment method. This repayment method is to distribute the total amount of loans evenly during the repayment period, and repay the equal principal and interest generated by the remaining loans in the current month every month. In this way, because the monthly repayment amount is fixed and the interest is getting less and less, the borrower is under great pressure to repay at first, but as time goes on, the monthly repayment amount is getting less and less. That is to say, in the average capital method, the amount of principal returned every month is always the same, and the interest decreases with the decrease of the remaining principal, so the monthly repayment amount is gradually reduced.
Advantages: You can save more interest.
Disadvantages: the early repayment pressure is great.
The calculation formula is:
Monthly principal and interest repayment amount = (principal/repayment months)+(principal-accumulated repaid principal) × monthly interest rate.
Monthly principal = total principal/repayment months
Monthly interest = (principal-accumulated principal repayment) × monthly interest rate
Total repayment interest = (repayment months+1)* loan amount * monthly interest rate /2.
Total repayment amount = (repayment months+1)* loan amount * monthly interest rate /2+ loan amount.