Understanding How Loan Payments Are Calculated
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When you take out a loan, the monthly payment is calculated based on the loan amount, interest rate, and repayment term. Lenders use an amortization formula to spread out the cost, so early payments go mostly toward interest, while later ones chip away at the principal. That’s why your balance seems to shrink slowly at first—understanding this math helps you see how extra payments can save you money over time.