Each payment made is partly the principle and part is the interest paid on the borrowed money. This can be best illustrated by the following example. You make 4 annual payments over the next 4 years to pay back the loan. Now, for practice find the i and P for the other 3 payments of our example loan problem. Try it out.
Total interest paid is very important when considering a repayment schedule.
Consider you borrowed a certain sum of money. The interest will be compounded monthly. The interest will be compounded monthly. You have two payment choices, both pay off the balance at the end of two years. Plan one is monthly payments which is 24 total payments.