Reference guide

How Loan Payments Work

Understand fixed-payment loan estimates, principal, interest, term, and payoff time.

Principal and interest

Principal is the amount borrowed. Interest is the cost charged on the outstanding balance.

Term and payment

For the same principal and rate, a longer term generally reduces the scheduled payment but can increase total interest.

APR versus interest rate

APR can include certain finance costs and its official calculation can vary by lending rules. Use the APR tool here as an estimate, not a lender disclosure.

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