Understanding Your Credit Payments
When taking out a loan, it's crucial to understand how your monthly payments are calculated and where your money goes each month. A common misconception is that you're just paying back the principal (the amount you borrowed) plus a bit of interest. In reality, the proportion of interest and principal changes every month through a process called amortization.
Interactive Credit Calculator
Use the sliders below to see how different credit amounts, interest rates, and loan terms affect your monthly payment and total cost.
Credit Calculator
Monthly Payment
856.07
Total Interest
272.90
Total Repayment
10,272.90
Payment Structure Chart
| Month | Payment | Interest | Principal | Remaining Balance |
|---|---|---|---|---|
| 1 | 856.07 | 41.67 | 814.41 | 9,185.59 |
| 2 | 856.07 | 38.27 | 817.80 | 8,367.79 |
| 3 | 856.07 | 34.87 | 821.21 | 7,546.58 |
| 4 | 856.07 | 31.44 | 824.63 | 6,721.95 |
| 5 | 856.07 | 28.01 | 828.07 | 5,893.88 |
| 6 | 856.07 | 24.56 | 831.52 | 5,062.37 |
| 7 | 856.07 | 21.09 | 834.98 | 4,227.39 |
| 8 | 856.07 | 17.61 | 838.46 | 3,388.92 |
| 9 | 856.07 | 14.12 | 841.95 | 2,546.97 |
| 10 | 856.07 | 10.61 | 845.46 | 1,701.51 |
| 11 | 856.07 | 7.09 | 848.99 | 852.52 |
| 12 | 856.07 | 3.55 | 852.52 | 0.00 |
How it works
The monthly payment is calculated using the standard amortization formula.
Each month, your payment first covers the interest for that month (Current Balance × Monthly Rate). The remainder of your payment goes towards reducing the principal balance. This is why you'll notice in the table above that the interest portion decreases each month while the principal portion increases.