2 min read
Definition
Front-loaded interest is a natural feature of reducing-balance loans: because interest is charged on the outstanding balance and that balance is largest at the start, early payments are mostly interest and later ones mostly capital. It is not a trick — but it means settling very early saves less than a naive halfway assumption suggests.
In plain terms
In the first stretch of a loan, your money is mostly renting the debt rather than repaying it — the balance barely moves at first.
Why it matters for your company
Understanding front-loading helps you judge early-settlement savings realistically. See amortisation schedule and Rule of 78.
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Amortisation schedule
An amortisation schedule is the table breaking every repayment into interest and capital, showing how the…
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Rule of 78
The Rule of 78 is an older interest-allocation method that front-loads interest, so settling early yields a…
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Early settlement figure
An early settlement figure is the exact amount to clear a loan before term — outstanding capital, accrued…
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Read →Funding for UK limited companies
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