FinSmart calculation guide
Understanding loan repayment methods.
Two loans with the same principal, nominal rate and term can produce different payment patterns depending on how principal is repaid.
Equal-payment method
The common annuity formula keeps the scheduled payment approximately level when the monthly rate is fixed. Early payments contain more interest; later payments contain more principal.
Equal-principal method
Principal is divided evenly across all months. Interest is calculated on the remaining balance, so the first payment is usually the largest and later payments decline.
Why a lender may show a different number
Real contracts may use daily interest, exact dates, fees, insurance, payment holidays, variable rates and institution-specific rounding. FinSmart uses a simplified monthly model and displays the first 12 rows for explanation.
How to compare responsibly
- Compare both first payment and total interest.
- Confirm whether the quoted rate is nominal or effective.
- Add fees and insurance separately.
- Use the lender's official schedule before signing.
Open the loan calculator · Read the methodology