Monthly installment
The amount debited each month, made of a slice of principal, a slice of interest and the insurance premium. It follows directly from the capital, term and rate: lengthening the term lowers it but raises total cost. It is the concrete variable around which borrowing capacity is built.
Key points
- Made up of a principal slice, an interest slice, and the borrower insurance premium.
- Early in the loan, interest makes up the larger share; it decreases progressively with each installment.
- Extending the term lowers the installment but increases total cost of credit.
- It is the central variable in borrowing capacity and debt-ratio calculation.
Frequently asked questions
How does the monthly installment evolve over the life of a fixed-rate loan?
The installment stays the same each month (excluding insurance revisions on outstanding balance), but its internal composition changes: the interest portion decreases with each payment while the principal portion increases in mirror. This is the constant-annuity amortisation principle. Early in the loan, most of it pays interest; late in the loan, most of it repays principal.
Why is insurance included in the monthly installment?
In the vast majority of contracts, the bank requires borrower insurance covering death, disability, and incapacity for work as a condition of granting the loan. The premium is therefore collected alongside the repayment and constitutes a significant component of the total monthly installment. It also feeds into the APRC calculation and influences the usury threshold.
What is the difference between a modular installment and a fixed installment?
A fixed installment stays constant throughout the loan except in specific events. A modular installment can be increased or decreased at the borrower's request, within contractual limits, to adapt to changing income. Raising it reduces the term and total cost; lowering it has the opposite effect. This option is highlighted by the broker for profiles whose income is expected to grow.
In practice
On a €180,000 loan at 3.50% over 20 years, the installment excluding insurance comes to roughly €1,044. Extending to 25 years, it drops to about €898 but total cost rises by nearly €14,000, illustrating the classic term/installment trade-off.
Official sources
- The annual percentage rate (APRC) · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr