Most consumer loans use fixed (amortized) payments: you pay the same amount every month, with the interest share shrinking and the principal share growing over time.
The formula
Payment = P × i × (1 + i)ⁿ ÷ ((1 + i)ⁿ − 1), where P is the principal, i the periodic (monthly) rate as a decimal, and n the number of payments. The monthly rate is the annual rate divided by 12.
A worked example
$10,000 at 6% APR for 36 months: i = 0.06 ÷ 12 = 0.005 and (1.005)³⁶ ≈ 1.19668. Payment = 10,000 × 0.005 × 1.19668 ÷ 0.19668 ≈ $304.22. Total repaid ≈ $10,951.90, so the loan costs about $951.90 in interest.
Why early payments feel "all interest"
Interest is charged on the remaining balance. In month one you owe interest on the full $10,000 (about $50); only the rest of the payment reduces the balance. As the balance falls, more of each identical payment goes to principal.
What changes the total cost
- A longer term lowers the payment but raises total interest — often dramatically.
- Compare offers by APR, which folds fees into the rate, not by the headline rate alone.
- Paying even slightly more than the required amount each month shortens the term and cuts total interest.
See your own payment and full amortization schedule with the Loan Calculator.