Loan Summary
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Understanding Loan Payments: A Comprehensive Guide
When taking out a loan, it's crucial to understand how your payments are structured. Each payment you make consists of two parts: principal and interest. The principal is the amount you borrowed, while the interest is the cost of borrowing that money.
In the early years of your loan, a larger portion of each payment goes toward interest. As you pay down the principal, more of each payment is applied to the principal balance. This is called amortization. Our loan calculator shows you exactly how this works with the amortization schedule.
Factors that affect your loan payments include the loan amount, interest rate, and term (length of the loan). A higher interest rate or longer term will increase the total interest you pay over the life of the loan.
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