Installment loans are amortized over a period of time. This simply means that you will pay off the loan over time through regular payments. A portion of each payment is for interest while the remaining amount is applied towards the principal balance. The percentage of interest versus principal in each payment is determined by an amortization schedule.

While a portion of every payment is applied towards both the interest and the principal balance of the loan, the exact amount applied to principal each time varies (with the remainder going to interest). Initially, a large portion of each payment is devoted to interest. As the loan matures, larger portions go towards paying down the principal.

In order to understand the amortization of your loan, use this calculator to determine the schedule of payments and how long it will take for you to repay the loan.

After these questions have been asked and answered, you should have sufficient information to make an informed decision about whether to proceed with the loan process. Now that you know, choose wisely.

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