The annuity is a sum of money paid for a determined period of time by a debtor, to reimburse the borrowed capital and the payment of the afferent installments. In order for the annuities to remain constant, the part representing reimbursed capital raises each year, while the part representing installment decreases. The annual amortization is the constant annuity minus the installment for the unamortized loan. This type of reimbursement determines a higher cost of the loan, as amortizations are higher towards the end of the reimbursement period. Reimbursement is made by tossing for bonds.

After the payment effectuation moment, the annuity can be an amortization annuity, paid at the end of the year also called reimbursement or ordinary annuity, and a deposit annuity, paid at the beginning of the year. By the period of reimbursement, the annuity can be temporary, when payment is made on a determined period unconditioned by any event; perpetual, which is paid continuously on a long period of time; and sporadic, when payment exists based on a person’s life existence or inexistence.

Depending on the amount of money, there are constant annuities, when the annual paid sums are equal and are calculated in virtue of a financial mathematics formula; variable annuities, when to the constant annual due installments there are added annual decreasing installments, calculated at a lower and lower unamortized credit.

A special example of annuity is the survival one – the coinsured person is awarded with periodical sum of money if the insured person’s death occurs. There are also specific forms, subordinate to this type, which are temporary survival annuity, offering a sum of money until the stipulated contract date or until the coinsured person’s death; and sporadic survival annuity, if the coinsured person deceases before the first insured person, the insurance contract expires before offering the first allowance.

How do you calculate annuity for a credit? The first installment is the one taken into account to establish eligibility. This is made of interest, monthly charges if they exist and capital. With the fixed installment variant, this is constant during the whole credit period. You must carefully study contractual clauses, because the fixed interest (doesn’t modify no matter what happens on market) is not found in any available product offer. For the products with fixed interest for the whole period, there is a stipulation in the contract according to which the bank reserves itself the right to modify this interest on certain conditions.

The interest can be fixed during the whole credit period, fixed for 6 months, for 1 to 6 years, or it can be variable, which is for the whole credit period. It can also be audited. Most banks have, besides interest charges, also charge for analyze, lending, and administrating, risk, which can be initial, monthly or annual, that applies to the initial credit value. If the contracted loan has equal installments, then the capital, interest and charges are adjusted, so the monthly annuity is constant. The interest and charges applied to the sold decrease in time, so that the capital has to increase to compensate.

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