Same loan, three repayment methods: first payment and total interest
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How it works
Equal installments: same payment every month. Equal principal: lowest total interest, highest early payments. Bullet: interest only, principal at maturity — highest total interest.
FAQ
Which repayment method has the least interest?
Equal principal repayment, because the balance falls fastest.
Worked example
Example: borrowing ₩300 million at 4.2% for 30 years:
Equal installments (원리금균등): ₩1,467,052 every month, total interest about ₩228.1 million
Equal principal (원금균등): ₩1,883,333 in the first month, falling each month, total interest about ₩189.5 million
Bullet / interest only (만기일시): ₩1,050,000 a month and the full ₩300 million at the end, total interest ₩378 million
Equal principal saves about ₩38.6 million in interest but costs about ₩416,000 more in the first month. Korean mortgages usually let you choose only between the first two; bullet repayment is mostly used for credit and jeonse loans.
Longer terms: stretching the same ₩300 million at 4.2% from 30 to 40 years lowers the equal-installment payment to about ₩1,291,388 a month, but total interest rises to about ₩319.9 million — more than ₩90 million extra. A lower monthly payment is not the same as a cheaper loan.
Common mistakes
Choosing only by total interest can leave you short of cash in the early years. Check the first-year payments too.
If you plan to repay early, the difference between methods shrinks — but check the prepayment fee.
Variable-rate loans are recalculated whenever the rate changes, so real payments will differ from these figures.
Banks test affordability (DSR) with a stress rate added, so the amount you can borrow may be lower than you expect.
Fixed and variable rates are not directly comparable.