annuity interest
Also called: anuitas
An installment method with the same total payment each month, where the interest portion shrinks and the principal grows.
What it means
Annuity interest is a method of calculating KPR installments with a fixed monthly payment amount. Within it, the interest portion is larger at the start and the principal portion grows over time. This method is commonly used for home credit so families can easily plan cash flow. The total installment stays the same, but the composition of interest and principal changes each month.
Why it matters for families
Because the installment is fixed, families can more easily arrange their monthly budget. However, the large interest portion at the start makes the debt principal fall slowly in the first years. If the family wants to pay off early, they need to understand that the remaining principal may still be quite large. Misunderstanding this can cause a shock when applying for early repayment.
Example
For example, a credit ceiling of Rp400 million with a 15-year tenor. The monthly installment is fixed, but in the first year most of the installment goes to interest. In the following years, the principal portion increases. The exact figures depend on the agreed interest rate.
Common misunderstanding
Many think a fixed installment means the debt principal falls evenly. The correction: with an annuity, the principal falls more slowly at the start.