The monthly payments for a given loan are divided into amounts that apply to the principal and to the interest. For example, if you make a monthly payment of $500, only a portion of the $500 goes to the principal and the remainder is the interest payment.
The monthly interest is computed by multiplying the monthly interest rate by the unpaid balance. The monthly payment minus the monthly interest is the amount applied to the principal.
The following table is the sample loan payment schedule for a 1-year loan of $5000 with a
12 percent annual interest rate. much, e.g. how to change 1.234 to 1.23)