In-depth guide

Loan amortisation: why early payments are interest-heavy

Standard amortising loans compute a payment that stays constant while the interest portion shrinks over time as principal declines—unless rates adjust or you refinance.

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The payment identity

Each period: interest accrues on the outstanding balance since the last payment. What remains of your payment after interest pays down principal. Early on, balance is large so interest dominates.

Extra principal payments

Paying additional principal reduces future interest-bearing balance—often more impactful earlier in the loan when balances are highest.

FAQ

Does this include origination fees?
No—factor fees separately into APR comparisons.
Variable rates?
Payments may reset when index moves—model constant rates here.
Biweekly tricks?
Equivalent to extra annual payments—verify lender crediting rules.

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