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Loan repayment calculator

Compare equal payment vs equal principal repayment methods and visualize grace periods, total interest, and balance trends.

Inputs

MethodSame total each month
Total interest
$247.2K
$247,220
Total repayment
$547.2K
Principal $300.0K
First payment
$1.5K
Monthly
Last payment
$1.5K
Same in equal-payment

Yearly balance · monthly payment

BalanceMonthly
If you switch to Equal principal
Total interest −$44.2K
1st $2.0K · last $836

How the loan repayment calculator works

A loan charges interest each month on the outstanding principal, and how you split that interest over time greatly affects both your monthly payment and the total interest paid through maturity. This tool simulates two repayment methods — equal payment and equal principal — plus an interest-only grace period, month by month, instantly showing your first payment, total interest, and the curve of your shrinking balance. Below we walk through the logic of both methods, a concrete numeric example, the Korean lending context around regulation and taxes, and common mistakes with practical tips.

How the two repayment methods are calculated

The calculator divides your annual interest rate by 12 to get a monthly rate (r) applied to the balance each month. Equal payment keeps the total of 'principal + interest' constant every month using payment = principal × r(1+r)^n ÷ ((1+r)^n − 1), where n is the number of repayment months; each month it deducts balance × r as interest and applies the rest to principal. Early on the balance is large, so interest dominates; later, principal dominates. Equal principal repays the same principal each month (loan ÷ number of months) while interest is recomputed on the shrinking balance, so the first month is heaviest and it gets lighter over time. The final month clears whatever balance remains down to zero.

Worked example — 300M KRW, 4% annual, 30 years

Suppose you borrow 300 million KRW at 4% annual (about 0.333% monthly) for 30 years (360 months). With equal payment, you pay about 1.43M KRW every month, and total interest through maturity reaches roughly 155M KRW — more than half the principal. The same loan under equal principal starts heavier at about 1.83M KRW (830K principal + 1M interest) but shrinks each month to about 830K at the end, with total interest around 120M KRW — roughly 35M less than equal payment. Add a 3-year grace period and the principal does not shrink at all while you pay only about 1M in interest each month; once grace ends you cram the principal into the remaining 27 years, raising the monthly payment and pushing total interest higher. Note too that cutting the term to 20 years at the same 300M and 4% raises the monthly payment but nearly halves the total interest.

The Korean lending context — DSR, LTV, prepayment fees

This calculator assumes a fixed rate and equal days each month. In reality, how much you can borrow is itself regulated: LTV (loan limit relative to property value) and DSR (annual principal-plus-interest ÷ annual income, currently 40% at banks and 50% at secondary lenders) are the key caps. DSR sums the annual repayment of all your loans, not just this one, against your income, so equal payment's lower monthly figure is often more favorable for the limit. A prepayment fee (typically 0.5–1.4% of remaining principal) also applies if you repay within 3 years and is not reflected here, so factor it in if you plan to pay down principal early. Mortgage interest is often not deductible, but qualifying long-term mortgage interest can be deducted in Korea's year-end tax settlement.

Common mistakes and practical tips

First, choosing equal principal just because total interest is lower is risky — its first payment is nearly 30% heavier than equal payment, so for cash-strapped newlywed or younger households, equal payment can be the safer choice. Second, treating the grace period as merely 'the easy option' is a trap: during grace the principal does not shrink at all, raising total interest, and the monthly payment jumps once grace ends. Third, your bank app's first payment may differ slightly because banks prorate by day from the disbursement date to month-end, and a variable rate changes things at every reset. This calculator is a fixed-rate estimate, so for variable-rate loans it is wise to also run a rate-rise scenario (e.g. +1–2 percentage points).

FAQ

Which is better: equal payment or equal principal?

By total interest, equal-principal wins. For the same ₩100M at 5% over 30 years, equal-principal's total interest is roughly 15-20% lower than equal-payment's. But equal-principal has the highest first-month payment, so the early burden is heavier. If cash flow is tight, the constant equal-payment is safer; if you have early headroom and want to save interest, equal-principal is better. Compare both methods' first payment and total interest right here.

Is taking a grace period a bad idea?

A grace period means paying interest only, with no principal reduction — 1-3 years is common for Korean mortgages. Since principal doesn't shrink during grace, you pay more interest, raising total cost. But it secures short-term cash flow if you need lump sums for move-in/renovation or expect rising income soon. If you can afford it, starting principal repayment immediately (no grace) is best for minimizing interest.

How is the prepayment penalty calculated?

Typically a sliding formula: 'prepaid principal × fee rate × (remaining days ÷ penalty period)', often waived after 3 years. Fee rates run ~1.2-1.4% for mortgages, ~0.5-0.8% for credit loans. E.g., repaying ₩50M after 1 year at a 1.4% rate over a 3-year period is ~₩467K (₩50M × 1.4% × 2/3). This calculator assumes normal repayment to maturity, so account for prepayment penalties separately.

What are DSR and DTI, and how do they differ?

DSR (Debt Service Ratio) = 'annual principal + interest of ALL loans ÷ annual income', summing mortgage, credit, auto and every debt's repayment. Korea currently caps it at 40% for banks, 50% for non-bank lenders. DTI (Debt-to-Income) = 'mortgage principal+interest + other loans' interest only ÷ annual income' — looser than DSR. Both regulatory metrics limit debt relative to income to prevent over-borrowing.

What is the interest-rate-reduction request right, and how do I apply?

It's a legal right (Banking Act) to ask your bank to lower your rate once your credit improves after borrowing. It applies when income rises via promotion/job change, your credit score increases, or you've paid down other debt. Apply via the bank app or branch with proof (employment/income certificates); results typically come within ~10 business days. Even if denied, you can reapply after 6 months — worth trying whenever your situation improves.

Variable or fixed rate — which is better?

Variable wins when rates fall; fixed wins when rates rise. Variable rates usually reset every 6-12 months against a market index (COFIX, etc.), while fixed stays constant to maturity. Korea also offers 'hybrid' loans (fixed for 5 years, then variable) and 'rate-cap' loans (limiting increases to 0.45pp/year, 2pp over 5 years). This calculator assumes a fixed rate, so for a variable loan, enter your expected average rate to simulate.

Why does this calculator differ from my bank app?

Banks often prorate the first month's interest from the disbursement date to month-end, so the first payment can differ slightly here. Variable rates change the payment at each reset, and some banks fix the repayment date to a set day, changing the interest day-count. This calculator uses a fixed-rate, equal-days-per-month estimate — best for comparing total interest size and repayment methods.

How much interest can I save by repaying early?

Equal-payment loans front-load interest, so prepaying early has the biggest effect. For ₩100M at 5% over 30 years (equal payment), an extra ₩20M repayment in year 5 can save tens of millions in total interest and shorten the term by several years. But weigh the prepayment penalty (within 3 years) and your emergency fund. As a rule, if the loan rate exceeds safe-asset returns, repaying wins.

If I exceed the DSR cap, is a loan impossible?

Exceeding the 40% bank DSR cap (50% non-bank) restricts new loans. To fit the cap you can: ① extend the term to lower annual principal+interest, ② first repay existing credit loans/card loans to shrink the numerator (existing debt), or ③ submit extra income proof (bonuses, rental income). Note that extending the term raises total interest — a trade-off — so compare total interest by term right here.

Can I repay principal during the grace period?

Most loans allow prepayment (ad-hoc repayment) of principal even during grace. Grace is a period where you 'may pay interest only,' not one that forbids principal payment — so repaying whenever you have room shrinks the balance and reduces later interest. Note that prepayment penalties may still apply during grace, so check your contract's prepayment terms.

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This calculator is for informational purposes only. Actual tax and returns vary by individual circumstances and market conditions. Consult a tax advisor or financial professional for important decisions.