When you take out an amortizing loan, your monthly payment on the loan remains the same over the life of the loan. However, the portion of the loan that pays off accrued interest and the portion that pays down your principal change over the life of the loan. At the start, more of your payment will go toward interest, but as the amount you owe decreases, so will the amount of interest paid. You must recalculate the principal and interest each time you make a payment.

1. • 1

     Divide the annual interest rate by the number of payments you make during the year to find the periodic interest rate. For example, if you make monthly payments and your loan has an annual interest rate of 10.2 percent, you divide 0.102 by 12 to get 0.0085 as your monthly interest rate.

   • 2

     Multiply the periodic interest rate by the amount you owe on your loan to find the interest. Do not use the original amount of your loan unless you have not paid any of it off. Your lender can provide you this information if you do not have it in your financial records. Continuing the example, if you still owed $8,000 on your loan, you would multiply $8,000 by 0.0085 to find that you would pay $68 in interest.

   • 3

     Subtract the amount of interest paid from your loan payment to find the principal paid. Finishing the example, if you made a monthly payment of $100, subtract $68 from $100 to find that you paid $32 in principal.