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How can a schedule show interest and principal separately?
A repayment schedule may split each instalment into interest and balance reduction.
The split can change as the balance changes, even where the payment itself stays the same.
Follow the columns rather than assuming that each payment reduces principal by its full amount. A schedule is an illustration under stated terms and may need updating after changes or missed payments.
Compare secured and unsecured structures
Definitions
- Nominal interest rate
- Stated rate used to calculate interest under the agreement; it does not describe every other charge.
- Annual comparison measure
- Annualized disclosure used to compare borrowing costs; its calculation and included charges depend on the jurisdiction and product.