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Why early payments are mostly interest

A loan's amortisation schedule charges interest on whatever principal remains outstanding, and early on almost all of it remains — so a large share of each early payment goes to interest, with only a small remainder actually reducing the balance. As the balance shrinks, the interest portion shrinks with it and more of each identical payment starts reducing principal. This is why a loan can feel like it is barely moving for the first several years even as payments continue on schedule.

What one extra payment a year actually does

Because extra payments apply directly to principal rather than to future interest, they have an outsized effect precisely because they arrive when the balance — and therefore the interest being charged on it — is at its highest. A single extra payment early in a loan's life typically removes more total interest than the same extra payment made later, even though the payment itself is identical.

APR and interest rate are not the same number

The interest rate prices only the money borrowed. APR folds in the rate plus most upfront fees — origination charges, certain closing costs — spread across the loan's term, which is why it usually reads slightly higher. Two loans advertising the same interest rate can carry different real costs once fees are accounted for, and APR is the number built to make that comparison fair.

Term length trades monthly comfort for total cost

Stretching a loan from a shorter term to a longer one lowers the monthly payment by spreading the same principal over more payments, but it also means paying interest for more months on a balance that declines more slowly. Two loans with identical principal and identical rate can differ substantially in total interest paid purely based on term length — the monthly payment and the total cost move in opposite directions.

What this schedule assumes

This amortisation schedule assumes a fixed rate and an on-time payment every period with no missed or additional payments beyond what you specify. A variable-rate loan, a missed payment, or a lender's specific rounding convention on the final payment can all shift the real schedule slightly from this projection. It is accurate to the standard amortisation formula; it is not a substitute for your lender's own statement.