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Understanding Loan Repayment Methods

Choosing the right repayment method significantly impacts your monthly payments and the total interest paid. Here's a breakdown of the three methods this calculator offers:

Principal & Interest

This is the most common method. You make equal monthly payments that cover both the principal (the original loan amount) and the interest. The interest portion is higher in the early stages, and the principal portion increases over time.

Principal Repayment

With this method, you pay off the principal amount in equal installments over the loan term. The interest portion decreases over time as the outstanding principal reduces.

Bullet/Balloon Payment

In a bullet loan, you only pay interest during the loan term. At the end of the term, you pay a large "balloon" payment that covers the entire principal amount.