Question

Assume a loan balance of $174,000, a monthly payment of $1,395, and an interest rate of 8%. On next month's payment, how much of the $1,395 will be applied to principal?

Answer 1

Given a loan balance of $174,000 and an interest rate of 8%, the interest due for the next months payment is given by

$\frac{0.08(174,000)}{12} \right)= \frac{13,920}{12} =\ 1,160$

Therefore, the amount out of the monthly payment of $1,395 that will be applied to the principal is $1,395 - $1,160 = $235.