Annuity Loan
An annuity loan is a loan with constant monthly payments, where the ratio of interest and principal portions shifts over the term.
Key Takeaways
- •An annuity loan is a loan with constant monthly payments, where the ratio of interest and principal portions shifts over the term.
- •Annuity Loan belongs to the Finance category. We explain it step by step for newcomers to Germany.
- •With 200,000 EUR, 3% interest and 2% repayment, the annuity is 10,000 EUR/year (833 EUR/month). In the first year: 6,000 EUR interest, 4,000 EUR principal.
meinetarife24 Editorial Team
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Detailed Explanation
The annuity loan is the most common loan type in Germany, especially for mortgages. The monthly payment (annuity) remains constant during the fixed-rate period.
How it works: - At the start: High interest portion, low principal portion - Over time: Decreasing interest portion, increasing principal portion - The total payment remains the same
Advantages: - Planning security through constant payments - Simple household budgeting - Automatically increasing principal repayment
Disadvantages: - High total interest costs over long terms - Interest rate risk after fixed-rate period ends - Less flexible than straight-line repayment loans
Fixed-rate period: Typical fixed-rate periods are 5, 10, 15, 20, or 30 years. Longer periods mean more security, but often higher interest rates.
Calculation Formula
Annuity = Loan amount × (Interest rate + Repayment rate)Practical Example
With 200,000 EUR, 3% interest and 2% repayment, the annuity is 10,000 EUR/year (833 EUR/month). In the first year: 6,000 EUR interest, 4,000 EUR principal.
Legal Basis
§488 BGB (Loan agreement)
Sources & Methodology
Our methodology: the meinetarife24 Editorial Team checks every definition against binding primary data sources and consumer-focused reference portals. We name the relevant legal basis, link related terms and update each entry regularly. We do not sell loans or tariffs ourselves. This explanation is provided purely for information.
- • Legal basis: §488 BGB (Loan agreement)
- • Price Indication Regulation (PAngV) at Gesetze im Internet
- • Finanztip and the Deutsche Bundesbank as independent references on interest rates and consumer credit.
Go deeper on financing: Understanding the effective annual interest rate and Loan comparison.