Loan Settlement Question

BTFC

I took out an 8 year loan in Feb 2008 & pay every month by Direct Debit, no missed payments. When I looked at my last statement I notice that the amount of each months payments was allocated against capital & interst. The early payments were allocated almost exclusively to interest & now the payments are being allocated less against interst & more against the capital. Effectively I have already paid most of the interest so the outstanding capital on the loan (I guess this would be used for any settlement figure) is higher than it should be.

Can somebody tell me if this is correct?

AndyT678

Sounds right to me assuming that your monthly payments are unchanging. At the start you owe the full amount borrowed so the interest charge is at its highest and most of the payment goes on this. As you make payments the amount owed decreases and so does the associated interest charge so more of the payment is allocated to repaying the capital.