Principal and interest, separately
Tell the amount you borrowed from the cost of borrowing it, using the same payment every month.
Short answer
Principal is what you borrowed. Interest is what you pay to borrow it. On a fixed loan, total interest is every payment added up, minus the principal.
Read the total, not only the month
Once you know the fixed payment and the number of months, multiply them. Subtract the original amount. The remainder is interest under this formula. A lower rate or a shorter term usually cuts that remainder, and a shorter term raises the monthly payment. You are choosing between those two effects.
Extra payments change the picture because they cut the balance that future interest is charged on. This page does not model extra payments. If you are comparing lender paperwork, check whether the APR includes fees the monthly math ignored.
Common mistakes
- Assuming half the payment is principal from the first month.
Frequently asked questions
- Where is the number?
- The loan payment calculator lists the monthly payment, the total paid, and the interest.