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How to calculate equal repayments

2025-11-27 09:00:29 Real Estate

How to calculate equal repayments

Equal payments are a common repayment method when taking out a loan or installment plan. It refers to the same repayment amount each period, including principal and interest. This article will introduce in detail the calculation method of equal repayment and help you better understand through structured data.

1. Basic concepts of equal repayment

How to calculate equal repayments

Equal repayment, also known as equal principal and interest repayment, means that the borrower repays the loan principal and interest in equal amounts every month. The characteristic of this method is that the monthly repayment amount is fixed, which facilitates budget planning. The following is the core calculation formula for equal repayment:

variablemeaning
PLoan principal
rMonthly interest rate (annual interest rate ÷12)
nNumber of repayment months
MMonthly repayment amount

2. Calculation formula for equal repayments

The monthly repayment amount (M) is calculated as:

M = P × r × (1 + r)^n ÷ [(1 + r)^n - 1]

Among them:

  • P: Loan principal
  • r: monthly interest rate (annual interest rate ÷ 12)
  • n: Number of repayment months

3. Calculation examples

Assuming you have a loan of RMB 100,000 with an annual interest rate of 5% and a loan term of 5 years (60 months), the monthly repayment is calculated as follows:

Projectnumerical value
Loan principal (P)100,000 yuan
Monthly interest rate (r)5% ÷ 12 ≈ 0.004167
Number of repayment months (n)60 months
Monthly repayment amount (M)100,000 × 0.004167 × (1 + 0.004167)^60 ÷ [(1 + 0.004167)^60 - 1] ≈ 1,887.12 yuan

4. Advantages and disadvantages of equal repayment

Advantages:

  • Monthly repayments are fixed for easy financial planning.
  • There is less initial repayment pressure and it is suitable for borrowers with stable income.

Disadvantages:

  • Total interest expense is higher because more interest is paid back upfront.
  • It is not suitable for early repayment because the upfront interest rate is high.

5. The difference between equal repayment and equal principal

Equal repayment (equal principal and interest) and equal principal are two common repayment methods. The following is their comparison:

Comparative itemEqual principal and interestEqual amount of principal
Monthly repayment amountFixedDecreasing month by month
total interesthigherlower
Suitable for the crowdStable income earnerThose with higher incomes

6. How to choose the repayment method?

When choosing a repayment method, you need to decide based on your own financial situation and future income expectations:

  • If you have a stable income and want less monthly repayment pressure, equal principal and interest payments are more suitable.
  • If you have a higher income and want to reduce your total interest payments, equal principal payments are more cost-effective.

7. Summary

Level repayment is a common loan repayment method that reduces borrower stress by fixing monthly payments. Mastering its calculation formulas and features can help you better plan your finances. If you have loan needs, it is recommended to choose the appropriate repayment method based on your own situation.

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