Under a differentiated scheme, the loan principal is divided into equal parts according to the number of months, and interest is calculated each time on the unpaid balance. Since the balance decreases, the interest portion also decreases, so the total payment declines over time.
Comparison with annuity shows two opposite pictures. Initial payments under a differentiated scheme are notably higher, which complicates obtaining credit: the bank assesses repayment capacity by the maximum payment, and the available loan amount turns out to be lower. However, the total overpayment for the entire period is lower, since the debt decreases faster from the beginning.
The choice depends on the borrower's situation. A differentiated scheme is more beneficial with stable income and budget cushion, while annuity is more convenient when planning equal expenses and with limited current income. Many banks offer only annuity, so the availability of alternatives should be clarified before signing the contract.