How is a loan repayment calculated?
Standard amortization: PMT = P × i / (1 − (1 + i)⁻ⁿ), where P is the amount owed, i the monthly interest rate, and n the number of months. Each payment covers that month's interest first, and the remainder reduces the balance — which is why early payments feel like they barely dent the debt.
How long will repayment take at my current payment?
Switch to "find how long it takes" mode: the formula is n = log(PMT / (PMT − P·i)) / log(1 + i). Example: $20,000 at 7.5% with $400/month takes about 61 months and roughly $4,100 of interest. If your payment barely exceeds the monthly interest, the timeline explodes — small increases matter enormously.
Why does the calculator say my payment doesn't cover interest?
If your monthly payment is less than balance × monthly rate, the debt grows every month despite your payments — negative amortization, with no payoff date. The fix is a higher payment, a lower rate (refinance/consolidation), or restructuring. The error message shows the minimum interest-covering amount.
Should I choose a longer or shorter repayment term?
Shorter terms cost more monthly but far less in total: $20,000 at 7.5% costs about $2,400 interest over 3 years versus $8,100 over 10 years. Pick the shortest term whose payment you can sustain comfortably — and remember most loans let you pay extra to shorten the term informally.
Why does my balance barely move in the first few years?
Because interest is charged on the outstanding balance, which is at its largest at the start, so early payments are mostly interest and only a small slice reduces the debt. As the balance falls the interest portion shrinks and the principal portion grows, which is why progress accelerates markedly in the later years. On a long mortgage the halfway point in time is nowhere near the halfway point in balance. It also explains why overpayments made early are worth far more than the same amount paid near the end.
If I overpay, does my payment fall or does the loan finish sooner?
By default, almost always sooner — the payment stays the same and the term shortens, which is where the interest saving comes from. Some lenders will instead recalculate the payment down over the original term, sometimes called recasting, and a few charge a fee for it. Lowering the payment reduces your committed outgoing but saves much less interest. Neither is wrong, but they serve different goals, so tell the lender which you want rather than assuming, and check whether early repayment charges apply.