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How are payments allocated within an account?
An agreement can describe how received money is applied to charges, interest and principal.
This matters when a payment differs from the scheduled amount or arrears exist.
Ask for a breakdown if the balance does not change as expected. The full payment appearing in the account is not evidence that the same amount reduced principal.
Read the borrowing-cost checklist
Definitions
- Total repayable
- Sum payable under the stated schedule and its assumptions; contingent charges and changes must be considered separately.
- Amount received
- Money actually made available to the borrower, which can differ from the stated loan amount if a charge is deducted.