How is interest calculated?
When you borrow money, the amount you borrow is called the "principal" and the amount you pay for borrowing is called "interest".
Interest accrues at the percentage rate provided in the loan agreement based on the currently outstanding, or unpaid, principal amount. As additional instalment payments are made, the outstanding principal amount is reduced over time, thus lowering the amount of interest that accrues on a daily basis (the interest percentage rate remains constant, but the actual amount of interest is smaller based on a smaller outstanding principal amount).
Early repayments or repayments of more than the contractually required instalment amount will result in a smaller amount of total interest paid over the life of the loan.