This is a process understood as "amortization." To determine your monthly mortgage payment over the life of your loan, make certain to check out our mortgage calculator. On the other hand, installment loans-- like a car loan-- can either be: "Simple interest add-on" or "Basic interest amortizing" These are really written as a single loan; all of the interest that will be due is determined in advance, contributed to the total of the loan as a finance charge, then that amount is divided over the number of months in the term to reach your month-to-month payment.These work like a mortgage, with a decreasing loan balance and declining term producing a constant regular 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 basic interest add-on loans with a twist; they are structured to have you pay the interest due on the loan first, then as soon as that's done, your payments will cover the principal.If you need to hold the loan to term, there is no distinction in overall cost when compared to a standard basic interest add-on loan, but if you ought to need to pay the loan off early, you'll find that you'll still owe most-- if not all-- of the original loan you took in spite of having actually made payments for some time period.