Examine payments $2-6$ together.

What is the remaining balance after the sixth payment?

How much of these five payments goes toward repaying principal?

How much of these five payments goes toward paying interest?

Notice that the balance left after the sixth payment is exactly equal to the amount paid toward principal with the last payment.

Check Your Understanding

You just took out a $$10,000$ personal loan to take care of some necessary expenses. You will pay back the loan with equal end$-$of$-$year payments over the next $10$ years. If the interest rate is $6\%,$ what is the annual payment on this loan?

In the loan$$s first $5$ years, approximately $$6,793\mathrm{.}40$ will be paid. How much of this goes toward repaying the principal on the loan?