Question 1

How are loan payments calculated?

Accepted Answer

Monthly loan payments are calculated using an amortization formula that divides the loan into equal payments of principal and interest. At the start of the loan, a larger portion goes to interest, and over time more goes toward paying down the principal.

Question 2

How does the interest rate affect total cost?

Accepted Answer

Even a small difference in interest rate can significantly change total cost. For example, a ₪500,000 loan over 20 years at 4% costs about ₪227,000 in interest, while at 5% it costs about ₪293,000 - a difference of ₪66,000.

Question 3

Is it worth repaying a loan early?

Accepted Answer

Early repayment saves interest and shortens the loan term. However, check for prepayment penalties and consider whether investing the money elsewhere might yield higher returns than the interest rate on your loan.

Question 4

What is the difference between fixed and variable rates?

Accepted Answer

A fixed rate stays the same throughout the loan, providing payment certainty. A variable rate can go up or down based on market conditions, which could make the loan cheaper or more expensive over time.

Loan Calculator

How are loan payments calculated?

How does the interest rate affect total cost?

Is it worth repaying a loan early?

What is the difference between fixed and variable rates?