This is a procedure known as "amortization." To determine your monthly home loan payment over the life of your loan, be sure to inspect out our mortgage calculator. On the other hand, installation loans-- like a vehicle loan-- can either be: "Easy interest add-on" or "Simple interest amortizing" These are actually written as a single loan; all of the interest that will be due is determined up front, added to the overall of the loan as a finance charge, then that amount is divided over the variety of months in the term to get to your month-to-month payment.These work like a home mortgage, with a declining loan balance and declining term producing a constant monthly payment with changing structures of principal and interest. Prepaying these can save you some money. There can also still be loans based upon a thing called the "Rule of 78." These are simple interest add-on loans with a twist; they are structured to have you pay the interest due on the loan first, then once that's done, your payments will cover the principal.If you ought to hold the loan to term, there is no distinction in overall cost when compared to a basic easy interest add-on loan, but if you need to need to pay the loan off early, you'll discover that you'll still owe most-- if not all-- of the initial loan you took in spite of having paid for some time period.