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How to Calculate Capital Repayments

A capital repayment is the portion of your loan payment that goes to reducing your outstanding loan balance---what is called the loan principal. Whether you have a personal loan, line of credit or mortgage loan, all loans get charged interest and your regular payments to the lender are made up of a portion of interest and capital.

When the lender receives your payment, it takes the interest charge off the top and applies the difference to reducing the loan balance. That difference is called the capital repayment.

Find out the loan's outstanding balance by calling your lender's customer service department or looking up your latest monthly statement. Some lenders even give you the ability to look up your loan information online.

Find out the annual interest rate charged on your loan. Again, you can do this by inquiring with the customer service department or looking at your monthly statement.

Add 1 to your annual interest rate and convert it to a decimal number. For example, if your interest rate is 6 per cent, the decimal equivalent is 0.06. Adding 1 to that will give you 1.06. A double-digit interest rate, such as 10 per cent, is equivalent to 0.10.

Convert your annual interest rate to a monthly rate. Type in 1 + annual rate in your calculator, and press the "y to the power of x" key. On most scientific calculators, it is a grey key near the top of the calculator that looks like a lower case "y" with an "x" to the right and slightly higher.

Type 0.0833333 in your calculator. This number equals 1 divided by 12, telling the calculator that you want to convert the annual rate to monthly.

Subtract 1 from the result. Using 6 per cent as the annual interest rate, for example, the result would be 0.0048676.

Multiply that result by your loan balance. This will give you this month's interest on the loan.

Establish the amount of repayment you are making to the loan. For a line of credit, this is typically your choice. For a personal loan or mortgage, the amount is generally the same every month.

Subtract the amount of interest from your loan repayment. The result is your capital repayment that will reduce the principal balance on your loan.


If you do not have a calculator, use Microsoft Excel to calculate the monthly interest on your loan. Select a cell and type in a "+" sign, followed by 1 plus the annual rate. Next type the "^", usually located above the "6" on your keyboard. Then type 0.0833333 and press "Enter." Subtract 1 from that result to get the monthly interest rate.

Things Needed

  • Scientific calculator, with exponential function "y" to the power of "x"