Interest due is the amount of money required to cover the interest cost for that payment period. Also referred to as “accrued interest.”
Interest due is the amount of money required to cover the interest cost for that payment period. Also referred to as “accrued interest.”
Most mortgages and installment loans are structured so that payments cover the interest due plus reduce the balance a little each month. Each month, the balance gets smaller, so there is less interest expense, and as interest expense drops, more of the payment can be applied to paying down the balance. Eventually, the loan is paid in full.
In the example, below, the interest due on the $1,000 balance is $4.17 the first month. The next month, the balance is $918.56, and the interest due drops to $3.83. Every month, the balance is smaller, so the interest due is less, until the loan is fully repaid.
