How Are Principal Repayments Calculated?

Divide your interest rate by the number of payments you’ll make in the year (interest rates are expressed annually).

So, for example, if you’re making monthly payments, divide by 12.


Multiply it by the balance of your loan, which for the first payment, will be your whole principal amount.

How are principal payments calculated?

Each month you pay down the loan balance, or principal, by some amount. This means that the next month the interest charge will be less because the charge is calculated as the interest rate multiplied by the balance. Principal—The amount of each payment that goes toward the loan balance.

What percentage of payment is principal?

Traditional 30-Year Loans

Over the life of a $200,000, 30-year mortgage at 5 percent, you’ll pay 360 monthly payments of $1,073.64 each, totaling $386,511.57. In other words, you’ll pay $186,511.57 in interest to borrow $200,000. The amount of your first payment that’ll go to principal is just $240.31.

How are loan repayments calculated?

Amortized Loan Payment Formula

Assume you borrow $100,000 at 6% for 30 years to be repaid monthly. To calculate the monthly payment, convert percentages to decimal format, then follow the formula: a: 100,000, the amount of the loan. r: 0.005 (6% annual rate—expressed as 0.06—divided by 12 monthly payments per year)

What is the principal amount?

Principal Amount. The amount of money one borrows. Unless the loan is interest-free, one always pays more than the principal amount to the lender. The interest is calculated over the principal amount still outstanding. It is also simply called the principal.