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.

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     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.

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Any time you borrow money, you must pay back the amount that you borrowed (principal) and the fee the lender charged for borrowing it (interest). Lending institutions use the process of amortization to determine your monthly payment, which is a combination of principal and interest. Amortization ensures you pay your loan in full with consistent payments at regular intervals through the term of the loan. To determine your own payment amounts, you need to know your initial principal, the term of the loan and the annual percentage rate for your interest.

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     Write down your initial principal, your APR and your loan term. Convert your term and APR to the interval you want for your payments. For instance, if the loan term is expressed in years, multiply by 12 to get the number of months for a monthly payment plan. Likewise, divide the APR by 12 to get a per-month interest value. If you want to calculate a biweekly payment schedule, use 26 instead of 12.
     Principal: $5,000
     APR: 6 percent = 0.06/year = 0.005/month
     Term: 5 years = 60 months

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When you borrow money the balance is often called the principal balance. If you have all of the terms and conditions of your loan you can calculate how the principal is repaid when you make payments. Your payment is divided between the principal balance and interest. Interest is calculated on the unpaid balance, therefore the faster you pay down your balance the less you will have to pay in finance charges. To pay your balance faster you may want to consider paying more than your standard monthly payment.

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     Gather all of the terms and conditions of your loan. Your loan could be a credit card account, mortgage loan, automobile loan, or even a home equity line of credit. A 10 year loan in the amount of $20,000 with an interest rate of 6 percent will have payments in the amount of $222.04.

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Making an additional principal payment can help borrowers pay off a loan more quickly than sticking to the regular minimum payment schedule. When obtaining a loan, borrowers receive an amortization table, which lists each monthly payment and how much of the payment goes toward interest and how much reduces the principal balance. Because extra payments go straight toward principal, they change the remainder of the amortization table and bring the loan payoff date closer. You can use an online loan calculator to obtain your new amortization table and loan payoff date.

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     Look up information about your loan terms, including the original loan amount, date on which the loan was taken out, interest rate and the number of monthly payments in the original payment schedule. The number of monthly payments is also equal to the number of years of repayment times 12 months.

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