Work out the monthly instalment on a loan, what it costs you in total interest, and how each payment splits between principal and interest over the life of the loan.
Every instalment splits
| Month | Payment | Interest | Principal | Balance |
|---|
Interest is charged on what you still owe. At the start you owe almost the whole amount, so most of your instalment goes on interest and only a sliver reduces the balance. As the balance falls, the interest portion falls with it and the principal portion grows, which is why the last few years of a long loan clear debt so much faster than the first few. For the full mechanics behind this shift, see our guide to how EMI and amortisation work.
Same loan, different terms
500,000 at 9%
Total interest 122,751
Total interest 260,055
Total interest 579,671
Halving the instalment more than quadruples the interest. Figures rounded to whole units; check them against the calculator above.
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