How Fixed-Rate Loan Amortization Works
Loan amortization is the scheduled repayment of debt principal and accrued interest through regular periodic installments over a defined time horizon. Each payment is divided into an interest portion (the cost of borrowing against the current outstanding balance) and a principal portion (equity repayment that reduces the debt).
Equal Payment (Annuity) vs. Equal Principal (Linear)
- Equal-Payment Amortization (Fixed Monthly Installment): The borrower pays a constant dollar amount every month. In early periods, interest comprises the bulk of the payment; over time, as the remaining balance declines, interest drops and principal repayment accelerates until the loan reaches a zero balance.
- Equal-Principal Amortization (Decreasing Monthly Installment): The borrower pays a fixed amount of principal each month plus whatever monthly interest has accrued on the remaining balance. Installments start higher and decrease steadily, resulting in faster principal reduction and lower total interest paid over the life of the loan.
Mathematical Formulas
P_periodic = L * [ r * (1 + r)^n ] / [ (1 + r)^n - 1 ]
- L = Initial loan principal balance
- r = Periodic monthly interest rate (Annual Rate / 12)
- n = Total number of monthly installments (Term in Years × 12)
Benefits of Additional Principal Payments
Making recurring additional principal payments directly reduces the outstanding debt ahead of schedule. Because interest is computed on the remaining principal balance, extra payments compound into significant cumulative interest savings and substantially shorten the time to debt-free ownership.
Frequently Asked Questions
- Quelle est la différence entre mensualité constante et amortissement constant ?
- Avec des mensualités constantes, vous remboursez une somme identique chaque mois (la part d'intérêts diminue tandis que le capital remboursé augmente). Avec un amortissement constant, le capital amorti chaque mois est identique, ce qui fait baisser régulièrement la mensualité totale et réduit le coût global des intérêts.
- Comment un versement supplémentaire mensuel réduit-il le coût du crédit ?
- Chaque remboursement anticipé est directement déduit du capital restant dû. Comme les intérêts mensuels sont calculés sur ce capital restant, amortir plus vite fait chuter les intérêts futurs et rapproche la date de fin de prêt.
- Le changement de devise modifie-t-il les résultats ?
- Non. Le choix de devise modifie seulement l'affichage des symboles monétaires et la ponctuation des nombres, sans appliquer de taux de change.