See exactly what your loan really costs — and how to pay it off faster

Amortized vs. simple interest loans — and how extra payments change the math

Almost every mortgage, auto loan, and personal loan you'll encounter uses amortized interest: each fixed monthly payment covers that month's interest first, and whatever is left over reduces your principal. Early in the loan, most of your payment goes to interest. Later, more of it goes to principal — even though the payment itself never changes.

A smaller category of loans — often short-term or "add-on" installment loans — use simple interest, calculated once as principal × rate × time, with no compounding. The two methods can produce very different totals for the same rate and term, which is why it matters to know which formula applies to your loan before you compare offers.