Overview:
Throughout one point in almost every person’s life, you will have to take out a loan. Loans can be stressful when thinking about the numerous components to be aware of when taking a loan. Let’s break it down for you!
Let’s say you're taking out a loan for $500 with an interest rate of 2% for 12 months. The $500 is your principal (the amount you take out for a loan and is what you need to pay back.) When you start paying off your loan, you don’t exactly pay off your principal right off the bat. Your monthly deposit gets split up into paying your principal and interest rates.
The early months/years of your payment, most of your payment goes towards paying off interest rather than your principal. The longer you are into paying off your loan, the more money goes from paying interest into paying off your principal.
Read our next blog about specific examples and further information!
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