Romanians May Choose To Repay Loans In Equal Or Decreasing Installments

„Repaying medium- and long-term loans can be done in one of two ways: through in equal installments (annuities) and in decreasing installments. The consumer has the right to choose the manner in which this will be done,” says a new section added to article 38 of Government Emergency Ordinance no. 50/2010 and voted by the Committee for budget, finance and banks.

The amendment’s sponsors argued that repaying in installments of decreasing value presents a number of advantages, such as the total interest rate, much lower than if repaying in equal installments. For instance, the difference in the case of a EUR300,000 loan, maturing in 30 years, with an interest of 5.95% per year, is EUR79,231.

One disadvantage of decreasing installments, noted by the amendment’s motivation, is that they are higher in the first years, limiting the amount the consumer may borrow.