Annuity payment: how to calculate it and compare it with other schedules
The annuity payment is the most common loan repayment schedule in Ukraine: you pay the same amount every month. Behind that simplicity sits a redistribution — at first almost the whole payment goes to interest, and only later to the principal. Here is how the payment is calculated, how the total interest is built up, and when a declining schedule is the better choice.
A 100,000 UAH loan at 20%: comparing the schedules
| Term | Payment (annuity) | Payment (declining) | Interest (annuity) |
|---|---|---|---|
| 1 year | 9,549 UAH | from 9,549 UAH | 14,588 UAH |
| 2 years | 5,106 UAH | from 5,106 UAH | 22,544 UAH |
| 3 years | 3,684 UAH | from 3,684 UAH | 32,626 UAH |
| 5 years | 2,527 UAH | from 2,527 UAH | 51,620 UAH |
Under a declining schedule the early payments are higher but the interest saved runs to 3,000–6,000 UAH depending on the term. The loan calculator produces exact figures for your case.
What a loan payment is made of
A payment has two parts: interest for using the money, and repayment of the debt itself. Each month the bank charges interest on the balance at the start of the period and credits the rest of the payment against the principal.
With an annuity the total payment stays the same each month, but its composition changes. In the first month interest exceeds principal; by the last month interest has almost vanished and the payment goes almost entirely to reducing the debt.
That is why comparing two loans by monthly payment alone is a mistake. Two loans with the same payment can differ in cost — look at the total amount and the interest paid.
Another important point: an annuity is better when predictable budgeting matters, while a declining schedule is better when reducing the debt quickly matters most and you can afford a higher payment at the start.
The annuity formula in plain language
The payment is calculated from the loan amount, the interest rate and the term. The rate is converted to monthly (annual divided by 12) and the term into a number of months.
The formula: payment = loan amount × rate × (1 + rate)ⁿ ÷ ((1 + rate)ⁿ − 1), where rate is the monthly rate and n is the number of months.
The tricky part is the exponent. That is exactly why calculating an annuity by hand is awkward: you need either a calculator with memory or a table. Our calculator does it in one step and shows the full schedule straight away.
A useful property of this formula: all else equal, the longer the term, the lower the monthly payment and the larger the total interest. A five-year loan at 20% is easier to service than a three-year one, but it costs more overall.
Step-by-step worked example
Take a 100,000 UAH loan at 20% per year over 12 months. The monthly rate is 20% ÷ 12 ≈ 1.6667%, and n = 12 months.
Substituting into the formula gives a monthly payment of roughly 9,549 UAH. Over 12 months you would pay about 114,588 UAH, of which roughly 14,588 UAH is interest.
Now extend the term to 24 months at the same rate. The payment drops to roughly 5,106 UAH per month, but the total rises to about 122,544 UAH, and the interest to about 22,544 UAH.
The conclusion from those two numbers: doubling the term roughly halved the monthly burden but added around 8,000 UAH in interest. That is the price of predictability.
Annuity versus a declining schedule
With a declining schedule the payment differs every month: largest at the start, then gradually falling. The principal is repaid in equal instalments, and interest is always charged on the current balance.
That is why a declining schedule always costs less in interest: interest is charged on a shrinking balance. The early payments are noticeably higher, though, which can strain a budget.
An annuity gives a lower first payment and a constant load over the whole term — you pay more interest for that comfort.
Practical rule: if you can comfortably afford the maximum payment of a declining schedule, it costs less money. If you need a stable payment, take the annuity. For a 100,000 UAH loan at 20% over three years, the difference is typically several thousand UAH of interest.
What to look at when comparing bank offers
First — the effective rate, not the nominal one. A bank may advertise 20% per year while the effective APR, once fees and insurance are included, is higher. Compare the total cost of credit.
Second — the schedule. The same rate produces different total interest under an annuity and a declining schedule. Ask for a calculation under both.
Third — the term and the possibility of early repayment. With an annuity, early repayment saves more at the start of the term when interest makes up most of the payment. Check whether the contract charges a fee for early repayment.
Fourth — what is actually included in the cost. Service fees, insurance and origination charges increase the real cost even when the rate looks attractive.
Calculate the payment in the loan calculator
Payment, total interest and a full repayment schedule. calculate the payment in the loan calculator — Calculate the payment in the loan calculator.
Loan Calculator
Payment, total interest and a full repayment schedule.
FAQ
Why do early annuity payments feel expensive and the principal shrink so slowly?
Interest is always charged on the balance at the start of the month. Early in the term the balance is at its highest, so more of the payment goes to interest and less to principal. As the balance falls, the interest share drops and the principal is repaid faster.
Which is better — annuity or declining schedule?
On total interest, a declining schedule is cheaper because interest is charged on a shrinking balance. For budgeting convenience, an annuity is better because the payment never changes. If you can afford the higher early payments, a declining schedule saves several thousand UAH.
How can I work out the total interest before taking a loan?
Calculate the payment with the annuity formula, multiply by the number of months, and subtract the loan amount. Or use the loan calculator: it shows the payment, total interest, overall amount and a month-by-month schedule at once.
Is early repayment worth it on an annuity loan?
If there is no fee, early repayment is almost always worthwhile: you stop paying interest on the remaining balance. It saves more early in the term when interest makes up more of the payment. Check the contract — some banks restrict early repayment or charge a fee.
How does the loan term affect the total interest?
All else equal, a longer term lowers the monthly payment but raises the total interest. Doubling the term can nearly halve the monthly payment while adding thousands of UAH in interest. This is the classic trade-off between budget pressure and cost.
What is included in the effective interest rate on a loan?
The interest rate plus all associated costs: origination fee, monthly servicing, mandatory insurance, and application charges. That is why two programmes advertising the same 20% per year can cost a borrower very different amounts.
Why do banks usually offer an annuity rather than a declining schedule?
An annuity gives the bank a predictable cash flow: the same amount arrives every month, which is easier to value and model. A declining schedule requires the borrower to handle a heavier payment from the first month, and some borrowers with unstable income turn it down for that reason.
A 12-month loan or a 24-month one — which is cheaper if everything else is equal?
At 20% on 100,000 UAH the 12-month payment is higher, about 9,549 UAH, but the interest is lower: roughly 14,588 UAH against 22,544 UAH over 24 months. The choice is between the load on your monthly budget and the overall cost of the loan.