Equal-Payment vs Equal-Principal Loan Comparison
Enter the loan amount, annual interest rate, and term to compare the equal-payment (annuity) and equal-principal (constant amortization) methods side by side: the monthly payment, total repayment, and total interest of each. See at a glance how much the two methods differ in total interest.
Input
× 10k
%
yrs
Result
Total interest saved with equal principal
$305,431.00
Under the same conditions, Equal principal keeps the total interest lower
| Item | Equal payment | Equal principal |
|---|---|---|
| Monthly payment | $84,686.00 | $96,428.00 → $71,728.00 |
| Total repayment | $35,567,972.00 | $35,262,541.00 |
| Total interest | $5,567,972.00 | $5,262,541.00 |
Total interest difference (equal payment − equal principal)
$305,431.00
How it works
- The equal-payment (annuity) method keeps each monthly payment (principal + interest) constant, which makes budgeting easier, but the interest portion is large early on so the total interest is higher than the equal-principal method.
- The equal-principal (constant amortization) method keeps the principal portion of each payment constant and adds interest on the remaining balance on top. As the balance shrinks the payment gradually falls and the total interest is lower, but the burden is heaviest at the start.
- The equal-payment monthly payment = loan amount × monthly rate × (1+monthly rate)^n ÷ ((1+monthly rate)^n − 1), where the monthly rate = annual rate ÷ 12. The equal-principal monthly principal = loan amount ÷ number of payments (rounded down) and stays constant.
- Each payment's interest = remaining balance × monthly rate (rounded to the nearest unit), and any remainder is settled in the final payment so the balance reaches exactly zero. Because the principal is identical for both methods, the difference in total repayment equals the difference in total interest.
- Calculations assume a fixed rate for the entire term. Variable rates, fixed-period options, bonus payments, early repayment, credit life insurance, and fees are not considered.
- Results are rounded approximations. Actual amounts may differ depending on your lender's calculation and rounding rules. Weigh the early-repayment burden against the total interest and decide which method to use at your own discretion.
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Equal-Payment vs Equal-Principal Loan Comparison