Checkbox

Correct! Keep Going!

How amortization produces fixed payments (first half). Amortization spreads interest and principal across regular payments so the loan is paid off at term end. For a fixed-rate loan you compute the monthly payment from principal (P), monthly rate (r = APR/12), and number of payments (n): Payment = P * r / [1 − (1+r)^−n]. For the $12,000 example at 5% APR over 36 months, monthly rate r = 0.05 ÷ 12 ≈ 0.0041666667. Plugging into the formula gives a payment of about $359.65. That number comes from the exact amortization arithmetic — it’s the constant monthly amount that fully repays principal plus interest in 36 equal installments.

Interpreting the payment and alternatives (second half). Knowing the monthly payment helps assess affordability and compare lenders. Small changes in rate or term have predictable effects: a slightly higher APR increases the interest portion and total cost; a longer term lowers monthly payment but raises total interest paid. If you’re comparing offers, check the APR, fees, and whether the quoted payment includes things like mandatory insurance or prepayment penalties. If cash-flow matters, consider whether extra monthly principal payments are allowed without penalty — they can substantially reduce total interest and shorten the term.

Did You Also Know...

By Quiz Coins

The word “mortgage” comes from Old French meaning “dead pledge,” because the pledge ends when the debt is repaid.

Recent Blog Posts

Our Story To Financial Success

At Wise-Wallet, personal finance is a journey.

Read More
Credit Cards: Match Your Wallet to Your Lifestyle (Travel, Cashback, or Balance Transfer?)

Pick cards to match your life: cashback for simplicity, travel cards for frequent flyers who use perks, and balance-transfer cards to crush debt — then automate, pay in full, and track value.

Read More
How to Build a Bulletproof Emergency Fund (Even if You Hate Budgeting)

Build a simple, automatic emergency fund by choosing a target, automating transfers, and using low-effort saving hacks — no spreadsheets required.

Read More