How loan payments work
Most installment loans use the same amortization as a mortgage. Each fixed payment covers the interest accrued that period plus a slice of the principal, so your balance shrinks faster over time.
Cutting the total cost
Two things reduce what a loan costs overall: a lower interest rate and a shorter term. Making extra payments toward principal shortens the loan and saves interest.
Frequently asked questions
What is APR?
Annual Percentage Rate — the yearly cost of a loan including certain fees, making it better for comparison than the headline rate.
Does paying extra reduce interest?
Yes — extra payments go straight to principal, lowering the balance interest is charged on.
What term should I choose?
The shortest term whose monthly payment fits comfortably in your budget.