Loan repayment / Credit repayment

Loan repayment is the payment of the due amount of the loan.

In connection with taking out a loan, the borrower must firstly pay the interests and other bank charges, and secondly, repay the amount of the loan. The latter is the so-called principal. The payment of these is collectively called loan repayment. 

The method and schedule of loan repayment are determined by credit and loan agreements. 

The basic rule is that there is no deferral for interest payment, after taking out the loan, it must be paid according to the contract schedule (e.g. monthly or quarterly). Other bank charges are due for certain periods or events. Such a period can be a period of availability. The event can be the conclusion of a contract or the drawdown, for example. 

The borrower can get a grace period for capital repayment. The grace period specified in the contract applies to this. The capital can be repaid continuously or in one sum at maturity. In the case of a revolving credit, the payments may be made at any time. The parties may agree on amortizing capital repayment. In this case, the capital amount is repaid in predetermined installments and times.

If it is an important aspect that the amount of the loan repayment is fixed, then the repayment installment does not fixed include capital repayment and interest payments or fee payments during the maturity of the loan. It follows that when the outstanding principal is even greater, the interest to be paid after the given period within the repayment installment will be higher. 

In this period, a smaller amount of the fixed loan repayment is used to repay the capital. This requirement typically applies to loans where a fixed amount of loan repayment integrated into the monthly in the cash flow can help liquidity planning.

Separation of interest payment and capital repayment is more typical for corporate loans. In such a case, the interest payment is continuous, and the principal repayment is made by the schedule according to the contract.