Question 1

What is an amortized loan?

Accepted Answer

An amortized loan has fixed regular payments where each payment covers the accrued interest and reduces the principal. Early payments are mostly interest; later payments are mostly principal.

Question 2

Should I choose a shorter or longer loan term?

Accepted Answer

A shorter term means higher monthly payments but less total interest paid. A longer term lowers your monthly payment but significantly increases the total cost of the loan.

Question 3

How does extra payment affect a loan?

Accepted Answer

Making extra payments directly toward principal can reduce the total interest dramatically and shorten the loan term. Even one extra payment per year makes a meaningful difference.