A picture tells you the difference between equal principal payment and equal principal and interest payment. 98% of people are confused when it comes to buying a house or taking out a loan. Bank staff will always ask: which repayment method do you choose? Equal principal and interest or equal principal? Many people are unsure about how to choose between these two methods. Many say equal principal is more cost-effective, with lower interest; however, in practice, most people choose equal principal and interest. If we understand it in the simplest way, it goes like this: Equal principal and interest: the monthly repayment amount is the same. A portion goes to pay interest, and a portion goes to pay the principal. Equal principal: the principal repayment amount is the same every month, and as the principal decreases, the interest will also gradually decrease. The difference between equal principal and interest can be clearly seen in the image below. After viewing the image, you should now understand: The essence of equal principal is a method of quickly paying back the principal to the bank, which tightens one's cash flow, resulting in a high level of discomfort in the early stages. Whereas the essence of equal principal and interest is to pay a bit more in interest to alleviate cash flow pressure and reduce the pain of monthly payments, which clearly aligns better with the inherent meaning of taking out a loan.