If it is possible, could someone explain the exact way that monthly loan payments are reducing loan balance? What is happening every month I come to make payment? It is pretty much clear to me, only I have a problem understanding interest. What amount is it based on? There are so many small details that I really can’t gather them all.
There is nothing mystic here, you make your payment and than your loan balance gets reduced. It is that simple. It is reduced by the amount you have deposited, and interest is to be calculated later, again. I think, but I am not completely sure, that it is recalculated every month so that, if you’d make small enough payments, you could be on the same amount for your entire life.
