As equal instalment payments are made on a long-term loan,
A)the interest portion increases and the principal portion decreases.
B)the interest and principal portions remain the same.
C)the interest portion decreases and the principal portion increases.
D)both the interest portion and the principal portion decrease.

Question

Quizplus · Accepted Answer

In a typical long-term loan with equal installment payments (like a mortgage), the amount of each payment that goes towards interest decreases over time, while the amount that goes towards paying down the principal increases. This is because the interest charged is based on the remaining balance, which decreases as payments are made.

As Equal Instalment Payments Are Made on a Long-Term Loan