What is the difference between an annuity and a declining payment?

An annuity payment is the same amount every month. A declining (linear) payment repays an equal share of the principal every month, so the total payment decreases over time and the overpayment is typically lower.

How is the monthly annuity payment calculated?

Using the formula M = P × r × (1+r)^n / ((1+r)^n − 1), where P is the loan amount, r is the monthly interest rate, and n is the number of months.

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