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Chapter 17. Building Loan Formulas > Calculating the Principal and Interest

Calculating the Principal and Interest

Any loan payment has two components: principal repayment and interest charged. Interest charges are almost always front-loaded, which means that the interest component is highest at the beginning of the loan and gradually decreases with each payment. This means, conversely, that the principal component increases gradually with each payment.

To calculate the principal and interest components of a loan payment, use the PPMT() and IPMT() functions, respectively:


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