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Understanding Loan Payments
Loan payments are calculated using amortization, which blends principal and interest into equal monthly payments. Early payments are mostly interest, later payments are mostly principal.
Key Terms
- Principal: Amount borrowed
- Interest: Cost of borrowing
- Term: Length of loan
- Amortization: Gradual repayment schedule
💡 Tips
- Extra payments go directly to principal
- Shorter terms save significantly on interest
- Compare APR, not just interest rates
- Consider refinancing when rates drop