Fixed or declining instalments - which is cheaper?

Declining instalments are always cheaper in total interest. On a PLN 400,000 loan at 7.5% over 25 years, fixed instalments mean PLN 486,789.41 of interest and declining instalments PLN 376,250.00. The difference is PLN 110,539.41. The reason: with declining instalments you repay the capital faster, so interest is charged on a lower balance.

How big is the first declining instalment compared with a fixed one?

On a PLN 400,000 loan at 7.5% over 25 years, the fixed instalment is PLN 2,955.96 for the whole term. The first declining instalment is PLN 3,833.33, i.e. PLN 877.37 more (29.68% more). The declining instalment only drops below the fixed one at instalment 107, after almost nine years. The last declining instalment is PLN 1,341.67.

Do declining instalments lower your borrowing capacity?

Yes. The bank assesses your capacity on the basis of the highest instalment, i.e. the first one. A household with a net income of PLN 9,000 and living costs of PLN 3,500, at a test rate with a 2.5 percentage point buffer, can service an instalment of PLN 4,500. With fixed instalments that gives a capacity of PLN 495,212.54, and with declining instalments only PLN 385,714.29. The difference is PLN 109,498.25, or 22.11% less loan.

Can fixed instalments plus overpayment replace declining instalments?

Yes, and they do better. A fixed instalment of PLN 2,955.96 with a regular overpayment of PLN 877.37 a month (i.e. the same outlay of PLN 3,833.33 as the first declining instalment), applied to shorten the term, gives PLN 249,737.11 of interest instead of PLN 376,250.00 with declining instalments. That is PLN 126,512.89 less, and the loan ends after 14 years and 2 months instead of 25 years. On top of that, in a difficult month you can pause the overpayment, because only the PLN 2,955.96 instalment is compulsory.

Loans

Fixed or declining instalments? Let's work out what convenience costs

Declining instalments are cheaper by PLN 110,539.41. And that is not the whole story, because with them the bank will calculate your borrowing capacity PLN 109,498.25 lower. At the end we show a third way that beats both options.

Reading time: 10 minutes · 14 July 2026 · Piotr Litwa, KredytPartner

How each of them works

Fixed instalments (annuity)

You pay the same amount every month for the whole term of the loan. Only its internal make-up changes: at the start almost everything goes on interest, and you repay only a sliver of capital. Over time the proportion reverses.

R = P · i / [ 1 - (1 + i)^-n ]

R - instalment amount (fixed)
P - loan amount
i - monthly rate (annual ÷ 12)
n - number of instalments

Declining instalments

The capital part is fixed - it is simply the loan amount divided by the number of instalments (P/n). On top of it you add interest charged on the current balance. Because the balance falls every month, the interest falls too - and so does the whole instalment. The first instalment is the highest, the last the lowest.

R_k = P/n + balance_k · i

P/n - fixed capital part
balance_k · i - interest on what is still left to repay

The whole advantage of declining instalments fits in one sentence: you bring the balance down faster, so interest is charged on a smaller amount.

The numbers: a PLN 400,000 loan, 7.5%, 25 years

A typical mortgage. The same amount, the same interest rate, the same term - the only difference is how the instalments are spread:

	Fixed instalments	Declining instalments
First instalment	PLN 2,955.96	PLN 3,833.33
Last instalment	PLN 2,955.96	PLN 1,341.67
Total interest	PLN 486,789.41	PLN 376,250.00
Total amount to repay	PLN 886,789.41	PLN 776,250.00
Difference in interest	declining cheaper by PLN 110,539.41 · that is 22.7% of all the interest

PLN 110,539.41 - the price of convenience

That is how much extra you pay for your instalment being predictable and lower in the first years. There is no accounting trick here: with declining instalments, after five years you have PLN 320,000.00 left to repay, and with fixed ones - PLN 366,930.20. Interest is charged on exactly that difference, for the next twenty years.

Let's see how the declining instalment changes over time and when it stops hurting:

Instalment number	Declining instalment	Fixed instalment	Difference
1 (start)	PLN 3,833.33	PLN 2,955.96	+PLN 877.37
60 (after 5 years)	PLN 3,341.67	PLN 2,955.96	+PLN 385.71
107 (after ~9 years)	PLN 2,950.00	PLN 2,955.96	-PLN 5.96 - this is where they cross
120 (after 10 years)	PLN 2,841.67	PLN 2,955.96	-PLN 114.29
180 (after 15 years)	PLN 2,341.67	PLN 2,955.96	-PLN 614.29
240 (after 20 years)	PLN 1,841.67	PLN 2,955.96	-PLN 1,114.29
300 (last)	PLN 1,341.67	PLN 2,955.96	-PLN 1,614.29

The key number in this table: the declining instalment only drops below the fixed one at instalment 107, i.e. after almost nine years. For the first eight years of the loan you pay more every month - and that is the real, tangible price of those PLN 110,539.41 of savings. Nobody hands them to you upfront; you buy them in instalments.

The catch nobody mentions: lower borrowing capacity

This is the part missing from most comparisons on the internet. When a bank calculates your borrowing capacity, it looks at the highest instalment - and with a declining schedule the highest instalment is the first one. It does not care that in fifteen years you will be paying PLN 2,341.67. It cares whether you can handle PLN 3,833.33 now, and at an interest rate increased by a buffer, too.

Take a household with a net income of PLN 9,000, living costs of PLN 3,500, no other loans and no credit cards. A 25-year loan, interest at 7.5%, a buffer of 2.5 percentage points required by Recommendation S of the KNF (Poland's Financial Supervision Authority) - so the bank tests a rate of 10% - and a DSTI (debt service to income) limit of 50%. The bank establishes that the maximum instalment it can assign you is PLN 4,500.00. And only from that instalment does it work out the loan amount:

Fixed instalments

The bank tests a fixed instalment

The annuity instalment at the 10% test rate must take up no more than PLN 4,500.00. The bank solves the instalment formula "backwards" and gives you the amount it can lend you.

Maximum loan amount

PLN 495,212.54

Declining instalments

The bank tests the first instalment

Here the PLN 4,500.00 limit has to fit P/300 + P × 10%/12, i.e. the highest instalment in the whole schedule. The same income, the same bank - and a clearly smaller result.

Maximum loan amount

PLN 385,714.29

Declining instalments take away PLN 109,498.25 of borrowing capacity

PLN 495,212.54 with fixed instalments versus PLN 385,714.29 with declining ones. The same income, the same bank, the same date - 22.11% less loan. If the flat you are looking at costs more than your capacity with declining instalments, the choice of schedule is no longer about optimising interest. It becomes a question of whether you get the loan at all.

Nobody at the branch will tell you this directly. The adviser will simply suggest fixed instalments, because with them "the capacity works out". It is worth knowing why.

Check your own situation in the borrowing capacity calculator - the model calculates exactly as described: with a 2.5 percentage point buffer, a DSTI limit and the burden of card limits. More on the mechanism itself in "How a bank really calculates your borrowing capacity".

When to choose which

Declining instalments

Choose them when

You can afford a first instalment PLN 877.37 higher, with room to spare, not just barely.
Your borrowing capacity has a large margin above the amount you need.
Your income is unlikely to grow - or you are approaching retirement and want your instalments to fall over time.
You want to pay less interest and prefer the discipline to come from the schedule rather than your own willpower.

Fixed instalments

Choose them when

You need a predictable budget - the same amount every month for 25 years.
You are just starting your career and realistically expect to earn more in five years.
Your capacity is tight and with declining instalments the bank would not give you the amount you need.
You want to keep flexibility - and make up the difference in interest by overpaying, as described below.

A third way: fixed instalments plus overpayment

Since the whole advantage of declining instalments comes from giving the bank more capital at the start, you can do exactly the same with fixed instalments. You just pay the difference voluntarily.

We take the loan with the fixed instalment - PLN 2,955.96 - and every month we overpay PLN 877.37, exactly the difference from the first declining instalment. Your monthly outlay is always PLN 3,833.33 - identical to the start of the declining schedule. The overpayment is set to shorten the term:

	Fixed instalments	Declining instalments	Fixed + PLN 877.37 overpayment
Monthly outlay at the start	PLN 2,955.96	PLN 3,833.33	PLN 3,833.33
Repayment term	300 months (25 years)	300 months (25 years)	170 months (14 years and 2 months)
Total interest	PLN 486,789.41	PLN 376,250.00	PLN 249,737.11
Total amount to repay	PLN 886,789.41	PLN 776,250.00	PLN 649,737.11
Versus declining instalments	PLN 126,512.89 less interest and a loan shorter by 10 years and 10 months

The same cash every month, but a result PLN 126,512.89 better

You pay out of your pocket the same PLN 3,833.33 as with declining instalments. But instead of PLN 376,250.00 of interest you pay PLN 249,737.11, and the loan ends after 14 years and 2 months, not 25. The reason: an overpayment that shortens the term hits the capital harder than the fixed capital part P/n, and every instalment cut off is interest that will never be charged.

On top of that comes flexibility that a declining schedule does not give. Only the PLN 2,955.96 instalment is compulsory. In a lean month - after losing your job, during a renovation, when you are ill - you simply pause the overpayment and nothing happens to you. With declining instalments, PLN 3,833.33 is an obligation to the bank: if you do not pay, you are in arrears and get an entry in BIK (Poland's credit bureau).

Work out your own variant in the overpayment calculator - you will see how much shorter your loan gets and how much interest you cut.

An honest caveat: this is not a free lunch

The comparison is fair as to the result, but not as to cash flow over time. With fixed instalments plus overpayment you pay PLN 3,833.33 for all 170 months. With declining instalments your instalment falls from the first month and after nine years is already lower than PLN 2,955.96. In other words: in years 9-14 the overpayment strategy requires more cash from you each month.

In return you finish 10 years and 10 months earlier and pay the bank PLN 126,512.89 less in total. The sums come out clearly in your favour - on one condition: that you actually make the overpayments. A declining schedule leaves you no choice; overpaying takes discipline. If you know you will not keep up the habit, declining instalments are better for you - precisely because they do not ask your opinion.

The overpayment must SHORTEN THE TERM, not lower the instalment

By default the bank will suggest lowering the instalment - because then the loan lasts just as long and the bank collects far more interest. All the numbers in the table above apply to the "shorten the loan term" option. Tick it in your overpayment instruction and check in the confirmation that this is what was recorded.

Three things to remember

If you remember only this

1. Declining instalments are cheaper - by PLN 110,539.41. Always, without exception, because they bring down the balance on which interest is charged faster. The price is a first instalment PLN 877.37 higher, and higher payments for the first eight years.

2. Declining instalments cut your borrowing capacity by 22.11%. The bank tests the highest instalment, i.e. the first one. That can be the difference between getting a loan and not getting one.

3. Fixed instalments plus overpayment beat both options. The same monthly outlay as with declining instalments gives PLN 126,512.89 less interest, a loan almost 11 years shorter and the option to pause the overpayment in a difficult month. It is the best compromise between cost and safety.

Work it out yourself

Calculator

Loan repayment calculator

Switch the schedule between fixed and declining instalments and see both columns side by side: instalment amounts, total interest, total amount to repay and the full month-by-month schedule. All the numbers in this article were worked out by the same engine - you can reproduce them to the grosz.

Compare fixed and declining instalments

Overpayment calculator

Test the third way on your own numbers: fixed instalments plus regular overpayment, set to shorten the term.

Calculate your overpayment

Borrowing capacity calculator

Before you choose a schedule, check how much you can afford at all in the bank's eyes - with the buffer and DSTI.

Check your capacity

Read on

Overpay your loan or invest? - since overpaying beats declining instalments, let's check whether it also beats a deposit and shares. The answer: at 7.5%, yes.
How a bank really calculates your borrowing capacity - the 2.5 percentage point buffer, DSTI and why the first instalment decides everything.
Early repayment: getting the fee back - if you repay a consumer loan early, the bank must refund a proportional part of the fee.

The calculations were made with the js/finance.js engine, assuming: a PLN 400,000 loan, a fixed interest rate of 7.5%, 300 instalments, no fees and no insurance. Borrowing capacity was calculated with a model following the logic of KNF Recommendation S for a two-person household: net income PLN 9,000, living costs PLN 3,500, no other commitments, a DSTI limit of 50%, a 2.5 percentage point buffer (10% test rate); capacity with declining instalments was derived from the same maximum instalment by solving the equation for the first declining instalment. Every bank uses its own scoring, so real lending decisions may differ. This text is educational and does not constitute financial advice.