When taking out a loan, the borrower agrees to make monthly payments — but few people understand how their payment is actually structured when signing the contract. Meanwhile, loan payments can be calculated in two ways: equal amounts or amounts that decrease month to month. The first is called annuity, the second is differentiated, and the difference between them is real money in your overpayment.

The Main Principle: Interest Is Charged on the Remaining Balance

Before comparing schemes, it's important to understand the basic rule: interest is charged on the remaining principal of the loan, not on the original amount. Each payment consists of two parts: repayment of the principal and interest for using the money that month. The faster the principal decreases, the less interest you pay — this principle underlies all loan mathematics, including the benefits of early repayment.

Annuity Payment: The Same Each Month

An annuity scheme is paying the same amount each month according to the schedule. Within the payment, the structure changes: at the beginning of the term, interest makes up most of it, and the principal decreases slowly; by the end, the proportion reverses.

Pros:

  • predictability — the same amount easily fits into the family budget;
  • the first payment is lower than in a differentiated scheme — more accessible at the same income;
  • banks more often approve larger loan amounts.

Cons:

  • total overpayment is higher;
  • the principal is repaid slowly in the first years — this matters if you plan early repayment or collateral sale.

Differentiated Payment: From Larger to Smaller

Here, the loan principal is divided into equal parts by the number of months, and interest each month is charged on the remaining debt. That's why the first payment is the largest, and then payments decrease.

Pros:

  • smaller total overpayment — the debt decreases evenly from the first month;
  • the load decreases over time, freeing up the budget.

Cons:

  • difficult beginning: the first payments are noticeably higher than annuity;
  • the bank evaluates solvency by the maximum payment, so the available loan amount is smaller.

Let's Compare With Numbers

A loan of 12 million som for 12 months at 24% per annum (2% per month).

  • Annuity: each month — about 1,135,000 som. Total paid approximately 13.62 million, overpayment — about 1.62 million som.
  • Differentiated: first payment — 1,240,000 som (1 million principal + 240 thousand interest), last — 1,020,000. Overpayment — 1.56 million som.

The difference is small over a short term, but it grows with the term and amount: on a mortgage of 15–20 years, the differentiated scheme saves significant money. It's convenient to calculate the exact amount for your conditions using a loan calculator — for example, on the Central Bank's educational portal finlit.uz.

What to Choose

  1. Tight budget — annuity: a stable and lower payment is safer.
  2. Have income surplus — differentiated: a difficult start will be offset by lower overpayment.
  3. Plan to repay early — the scheme matters less than regular early payments: each reduces the balance and thus all future interest.
  4. The choice isn't always available: many banks offer only annuity. Clarify the scheme before signing and ask for a complete payment schedule — the bank is required to provide it.

Payment Discipline Rules

  • Mark payment dates in your calendar and submit money 2–3 days before the deadline — processing may take time, and even a one-day delay damages your credit history.
  • Monitor your loan status in the bank's mobile app.
  • Keep a reserve of at least one or two payments — for example, in a deposit with withdrawal options: this protects against delays if your salary is late.
  • When repaying early, clarify what decreases — the term or the payment: shortening the term is almost always more beneficial.

Conclusion: annuity buys comfort at the cost of overpayment, a differentiated scheme saves money at the cost of a difficult start. The right choice depends on budget surplus — but with any scheme, a borrower's main allies are the same: a schedule in front of you, payments without delays, and early payments that reduce the remaining debt.