Question 1

What is the difference between equal instalment and equal principal?

Accepted Answer

With equal instalment you pay the same amount every month; the split between interest and principal shifts gradually. With equal principal you repay a fixed slice of the loan each month plus interest on what is left, so payments start higher and drop steadily. Equal principal costs less interest in total but demands more cash in the early years.

Question 2

How much does the interest rate change my payment?

Accepted Answer

A lot, over a long term. On a 30-year loan, one percentage point on the rate typically moves the monthly payment by roughly 10–12% and the total interest by far more, because the difference compounds across 360 payments.

Question 3

Does a shorter term really save money?

Accepted Answer

Yes. Cutting a 30-year term to 20 raises the monthly payment but usually cuts total interest by roughly a third, because you are borrowing the money for ten fewer years.

Question 4

Are the numbers here exact?

Accepted Answer

They are exact for the maths shown, but your lender may quote a slightly different figure. Banks add fees, insurance and their own rounding rules, and some rates are variable rather than fixed for the whole term.