what is allocating your monthy payment between finance charge and principal?

Answer 1

not sure of your question....but the breakdown between interest and principal is called the amortization schedule.

Answer 2

I assume you are talking about a fixed-rate loan and want to know how much of your monthly payment is going towards Principal and how much is going towards Interest.

Generally speaking, in the beginning of your loan you are mostly paying Interest but by the end of the loan you are mostly paying Principal. There is a formula that the financial institutions use to come up with these figures but rest assured that a common person has tools that can do the same thing. If you have access to MICROSOFT EXCEL then you can plug in the below formula and find out how much of your payment went for Interest.

=IPMT(a%/12,1,b,-1*150000,0,0)

a = interest rate (apr)
b = loan payments remaining (number of months)
c = outstanding balance (what is still owed)

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Lets use some real figures so the formula makes more sense. Lets say you have a $150000 loan for 30 years (360 payments) @ 7.5% fixed interest and your monthly payment is $1049.

For the first month you type this in EXCEL ...
=IPMT(7.5%/12,1,360,-1*150000,0,0)

The answer you get is $938. What exactly does this figure tell you? It tells you that out of the $1049 montly payment for the first month, $938 went towards Interest and (1049-938=111) $111 went towards Principal.

So now from your $150000 loan, you take out $111 and you are left with $149889 as outstanding balance. Your number of payments has also decreased from 360 to 359. In the 2nd month of your loan, you would type the following in EXCEL ...
=IPMT(7.5%/12,1,359,-1*149889,0,0)

The answer you get is $937, which tells you that out of the $1049 montly payment for the 2nd month, $937 went towards Interest and (1049-937=112) $112 went towards Principal.

So now from your $149889 loan, you take out $112 and you are left with $149777 as outstanding balance. Your number of payments has also decreased from 359 to 358.

You would continue with this process for as long as you want to figure out the ratio between Interest and Princiapl. I hope this is what you were looking for.

Answer 3

Part of your payment goes towards the finance charge and part is applied to the principal. Your agreement will spell this all out. Read it.

Answer 4

A loan is amortized as you pay it back. A portion of your payment is for interest, the rest goes to principal.