![]() This results in a decrease in the total payment (principal plus interest) as shown in Figure 1. Because the unpaid balance of the loan decreases with each principal payment, the size of the interest payment of each loan payment also decreases. Interest is computed on the amount of the unpaid balance of the loan at each payment period. ![]() For example, the $10,000 loan shown in Table 1 is divided by the 20 payment periods of one year each resulting in a principal payment of $500 per loan payment. It is computed by dividing the amount of the original loan by the number of payments. With the even principal payment schedule, the size of the principal payment is the same for every payment. ![]() There are generally two types of loan repayment schedules - even principal payments and even total payments. ![]() This payment of a portion of the unpaid balance of the loan is called a payment of principal. ![]() These payments usually include an interest amount computed on the unpaid balance of the loan plus a portion of the unpaid balance of the loan. Many loans are repaid by using a series of payments over a period of time. ![]()
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