How Is a Loan Repayment Calculated?
Monthly repayments use the amortization formula: M = P[r(1+r)^n]/[(1+r)^n-1]. Each payment covers interest first, then reduces the principal. Early payments are mostly interest; later payments shift toward principal.
The amortization schedule above shows exactly how much of each year's payments go to principal vs interest, and your remaining balance at year end.
Frequently Asked Questions
How is my loan repayment calculated? +
Monthly repayments use the standard amortization formula. Each payment covers the monthly interest on the outstanding balance, with the remainder reducing the principal. Over time, the interest portion decreases and the principal portion increases.
Should I choose a shorter or longer loan term? +
Shorter terms mean higher monthly payments but significantly less total interest. Longer terms reduce monthly payments but you pay more overall. Use this calculator to compare scenarios side by side.
What is a good personal loan interest rate in 2025? +
Personal loan rates in the US typically range from 6% to 25% depending on your credit score. Borrowers with 720+ credit scores can often get rates under 10%. Rates above 20% are generally considered high-cost — consider alternatives.