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With an annuity schedule, you pay the same amount every month, but initially most goes toward interest. With differentiated payments, the principal portion is fixed while interest decreases, so early payments are higher but total overpayment is lower.

The annuity payment is calculated using the formula: PMT = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan amount, r is the monthly interest rate, and n is the number of months.

Differentiated payments are usually more cost-effective in terms of total interest, as the principal is repaid faster. However, annuity payments are easier for budgeting since the amount stays constant.

You can reduce overpayment by choosing a shorter loan term, making a larger down payment, selecting differentiated payments, or making early partial repayments toward the principal.