Loans
First-month interest and principal
Interest for a month is the opening balance times the monthly rate; whatever is left of the payment reduces the balance.
The Formula
I1 = P x r ; Pr1 = M - I1
Interest for a month is the opening balance times the monthly rate; whatever is left of the payment reduces the balance.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| I1 | First-month interest | currency | Charged on the full opening balance. |
| Pr1 | First-month principal | currency | Payment minus interest. |
What Each Symbol Means
I1currency
First-month interest
Charged on the full opening balance.
Pr1currency
First-month principal
Payment minus interest.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate an amortization schedule page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate An Amortization Schedule, filed under Finance. Every number the guide produces comes from substituting into this one line.