Understanding Loan Repayment in Depth
Even with the same interest rate and principal, the repayment method and rate type can materially change monthly payments and total interest. Actual borrowing capacity also depends on DSR/LTV rules and lender underwriting, whose scope, exceptions, and transitional rules vary by borrower, region, product, and application date. This article and calculator only compare the repayment schedule for the principal, rate, and term you enter; they do not determine a credit limit or approval.
Equal Installment vs Equal Principal vs Bullet — What Differs
There are three main repayment methods. Equal principal-and-interest (equal installment) keeps your total monthly payment (principal + interest) constant; early on, interest makes up most of it and principal shrinks slowly. Equal principal keeps the principal portion constant each month, so interest on the remaining balance falls over time — the early burden is highest but monthly payments drop later and total interest is lower. Bullet repayment means paying only interest throughout the term and repaying the full principal at maturity: lowest monthly burden, but highest total interest.
- Equal installment: under a fixed-rate assumption, the monthly payment stays nearly level and is easier to compare for cash-flow planning
- Equal principal: has the lowest total interest of these three under the same principal, rate, and term, but the highest early payments
- Bullet: avoids principal payments during the term, but creates a maturity-funding risk and the highest total interest
Worked Example — KRW 100M, 5% APR, 30 Years
Suppose you borrow KRW 100 million at 5% (0.41667% monthly) over 360 months. With equal installment, the monthly payment using P×r×(1+r)^n ÷ ((1+r)^n−1) is about KRW 536,800, and total repayment over 30 years is roughly KRW 193.26M — so total interest is about KRW 93.26M. With equal principal, month one is KRW 277,778 principal + KRW 416,667 interest = about KRW 694,400, falling roughly KRW 1,160 each month down to about KRW 279,000 in the final month. Equal-principal total interest is about KRW 75.2M, saving roughly KRW 18M versus equal installment — at the cost of about KRW 160,000 more in early monthly burden.
| Method | Early monthly payment | Late monthly payment | Total interest (30yr) |
|---|---|---|---|
| Equal installment | ~KRW 537K | ~KRW 537K | ~KRW 93.26M |
| Equal principal | ~KRW 694K | ~KRW 280K | ~KRW 75.2M |
| Bullet | ~KRW 417K (interest only) | KRW 100M lump sum | ~KRW 150M |
Fixed vs Variable (COFIX) Rates
Many variable-rate products use a benchmark such as COFIX plus a spread and reset on the schedule in the contract. Payments can fall if the reset rate falls and rise if it increases. A fixed rate makes payments predictable for its stated fixed period, but the initial difference from a variable quote depends on the date, product, and borrower. Which costs less ultimately depends on the future rate path, fixed period, spread, discounts, prepayment or switching costs, and actual holding period. Compare like-for-like quotes and both rising- and falling-rate scenarios rather than treating either type as universally preferable.
Check DSR, LTV, and Stress DSR Separately
DSR (Debt Service Ratio) compares recognized income with annual principal-and-interest for debts included under the applicable rules, while LTV compares the loan with collateral value. Stress DSR applies an add-on rate for underwriting to reflect rate-rise risk; it is not added to the contractual interest rate. Headline figures such as 40% at banks and 50% at non-bank lenders do not determine every borrower's limit. Policy loans, jeonse loans, and smaller credit exposures can receive different treatment, while region, home ownership, loan purpose, fixed/variable structure, effective date, and transitional rules can all matter. Verify the rules in force for your application with the Financial Services Commission and the lender.
- DSR check: confirm which existing debts are included and how each is amortized under the rules for your product. This calculator's payment is not an official DSR result.
- Grace period: an interest-only period lowers the early payment but increases total interest. Its DSR treatment must be checked separately for the product and current rules.
- Early-repayment fee: the five-bank average published with Korea's 2025 reform was a snapshot for specified new household loans, not a universal current rate or waiver period. Check the contract and the lender's latest disclosure for the product, remaining term, rate type, and other switching costs.
Related Tools / Guides
- Use the loan calculator to directly compare equal-installment vs equal-principal monthly payments
- Compare payments with estimated take-home pay in the salary calculator, but do not treat that as a regulatory DSR calculation
- If you're weighing a refinance, see the loan refinancing strategy guide
- Calculate savings and lump-sum interest alongside it with the interest calculator