Loan payments

MagicSean

I have a credit union loan and I was looking at the weekly payment history. It breaks each transaction down into principal and interest. I noticed that these fluctuate each payment. But the interest payment goes both up and down. I would have thought that the interest should go down steadily each week as the loan amount is reduced. Is this usual or am I understanding it wrong?

jor el

With a credit card, you pay interest based on the original loan amount, not on the current balance. So, if you spend €1000 on the card, and by the end of the month you have paid €999 off it, interest will still be applied on the full €1000. At the next month, it will again be applied to the full amount, unless you've paid it all off.

MagicSean

jor el wrote: »

With a credit card, you pay interest based on the original loan amount, not on the current balance. So, if you spend €1000 on the card, and by the end of the month you have paid €999 off it, interest will still be applied on the full €1000. At the next month, it will again be applied to the full amount, unless you've paid it all off.

It's a credit union home loan though. Not a credit card.

seamus

It depends on what way they calculate the interest afaik.

If they calculate the interest on a monthly basis, then it's likely that the first (or first two) payments in a month will pay off mostly interest, and the last two will pay off mostly principle.

rameire

it could also depend on the amaount of days in the month

if you pay monthly you will be charged interest for that month or the previous month.
so less interest will be paid in feb because of 28 days interest
march 31 days interest
april 30 days interest
may 31 days interest

the above could be a factor