Loan Amortization Explained: How Your Payments Work
Every loan payment splits into two parts: interest (what the lender earns) and principal (what reduces your balance). Early payments are mostly interest.
On a $20,000 loan at 14.5% for 60 months ($470.57/mo):
| Month | Balance Remaining | Interest Portion |
|---|---|---|
| Month 1 | $19,771 | $242 |
| Month 12 | $17,063 | $209 |
| Month 24 | $13,671 | $169 |
| Month 36 | $9,753 | $122 |
| Month 48 | $5,227 | $68 |
| Month 60 | $0 | $6 |