The personal loan contracts include the amortization schedule among the essential attachments. This document indicates: the total number of installments to be repaid, the payment due date, the total installment amount, the principal and interest. In Italy, the French model is used to calculate an amortization schedule. This means that the share of interest due to the financial company or bank that granted the loan will be higher in the first installments. As the customer repays the individual installments.
The interest portion will decrease and proportionally increase the principal portion.
This means that the client will repay most of the interest expense owed to the bank or financial institution in the first half of the amortization plan. It follows that a possible early repayment of the loan at the end of the amortization will not allow the customer to save on interest expense, since in large part already repaid.
An Italian amortization plan, on the other hand, would provide for a repayment of interest and principal in a constant and balanced way. This determines a significant advantage since from the first installments the capital portion to be returned to the lending institution would be reduced or less interest expense.
The calculation of the interest envisaged in the amortization plan must respect the limits of usury threshold rates.
If this is not respected, the loan agreement would be void. Each quarter, the MoveLife Bank publishes a document relating to the average global effective rates and a list of usury threshold rates to be respected.
In assessing the conditions to be offered to the customer. The updating of these data is quarterly and the lending institution will have to draw up the amortization plan based on the loan disbursement date and not on the resolution of the loan request.
The financial or bank must scrupulously comply with the information communicated
For example, if Liam Hunter requested a personal loan on 28 March 2012 and the contract was approved on the same day, the rates to refer to would be those of the first quarter of 2012. But if the contracts were printed on 01 April 2012, the lender should check whether the rate X applied to the contract always respects the maximum anti-usury threshold limits. If not, the loan should be re-released with the new conditions.
Thanks to the amortization plan, it will be possible to check the residual debt amount to be repaid to the financial or bank month by month.