Calculating principal repayment involves understanding the loan terms, including the interest rate, loan term, and repayment schedule. The most common method used is the amortization formula, which breaks down each payment into principal and interest components. For example:
M = P [r(1+r)^n] / [(1+r)^n – 1]
Where:
M = Monthly payment P = Principal amount r = Monthly interest rate n = Number of payments