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Sooner or later, all borrowers become repayers, and they have to make arrangements to pay back their loan. This is usually done by making equal monthly payments over a predetermined length of time. Calculating the monthly payment is called amortization . The mathematical formula used includes such variables as the interest rate, present value of the loan when the monthly payment calculation takes place, and the period of time in which the loan is to be repaid to the lender.

 

A second area often questioned has to do with voluntary accelerated payments whereby the borrower pays more than the calculated monthly required payment. Normal practice is that an individual can make payments above and beyond the calculated monthly payments without penalty. In fact, if you can possibly increase your monthly payments, your loan will be far less costly down the road.