Fixed instalments, changing composition
An instalment loan spreads the debt across equal monthly payments. Each payment covers the interest that accrued that month first, and whatever is left reduces the balance. Because the balance shrinks, the interest portion shrinks with it and the principal portion grows — that is amortisation.
APR is not the same as the interest rate
The interest rate is the cost of the money. The APR folds in compulsory fees as well, which is why a loan with a low headline rate and a large arrangement fee can be more expensive than a plain loan at a higher rate. Put the fee in the fee field here to see the real cost side by side.
Shorter term or lower payment?
Stretching a loan over more months always lowers the monthly figure and always raises the total paid. On $20,000 at 9.5%, three years costs about $3,000 in interest and seven years costs roughly $7,400 — the same debt, more than twice the interest. Choose the shortest term whose payment you can meet every month without strain.
Before you sign
Check whether early repayment is allowed without a penalty, whether the rate is fixed for the whole term, and whether payment protection insurance has been added by default. Those three details change the real cost more often than the advertised rate does. For a home loan specifically, the mortgage calculator adds tax and insurance, and how compound interest works explains why interest on a balance adds up so fast.