How loan payments are calculated
A fixed-rate loan uses the standard amortization formula. Each monthly payment is the same, and it is set so the balance reaches exactly zero on the last payment. Each month the lender first takes interest on the remaining balance (APR ÷ 12 × balance), and the rest of your payment reduces principal.
A longer term lowers the payment but raises total interest, often by a lot. Compare 3, 5 and 7 years on the same amount before you sign. The schedule and the Excel sheet show exactly how each payment splits between interest and principal.
Check for prepayment penalties
Most personal and auto loans in the U.S. let you pay extra with no penalty, but read the contract. Ask the lender to apply any extra amount to principal, not to next month's payment.