1 12.2 E-Z LOAN Fent - pa incipal Ferest A loan obtained from a lending institution is typically paid off over time using equal monthly payments over a term of many each payment, a portion goes toward interest and the remaining amount is deducted from the balance. This process is repe balance is zero. Interest is calculated by multiplying the current balance by the monthly interest rate, which is usually expres an Annual Percentage Rate (APR). This process produces an Amortization Schedule where the amount applied to interest is reduced each month and the amount applied to the balance grows. For example, the following amortization schedule is for 10.000 at an APR of 3.9% over a term of 30 months pay tiprincipi