- 23 Oct 2023
- 2 Minutes to read

- Print
- DarkLight

# Create a Loan - Interest Rate, Amortization and Payment

- Updated on 23 Oct 2023
- 2 Minutes to read

- Print
- DarkLight

On the **Interest Rate, Amortization, and Payment** page you specify the Annual Interest Rate and the Amortization Period or Standard Payment Amount.

To learn more about payments and amortization, please review the "**Understanding Payments and Amortization**" document in the Bryt Knowledge base.

**Annual Interest Rate:** The interest rate (e.g., 10.5%) is the rate that is paid or charged for the use of money. Interest rates are usually charged based on an annual percentage of the principal. For example, if a lender charges an interest rate of 10% on a loan of $1000, the total interest charged in a year is $100 for this $1000 loan.**Amortization** is paying off a debt over time in equal installments or **Payments**. On a loan with an interest rate and amortization amount, part of each **Payment** goes toward the loan principal and part goes toward interest. With **Amortization**, the amount going toward principal starts small and grows each pay period. Meanwhile, the amount going toward interest declines each pay period for fixed-rate (non-variable interest rate) loans.

A loan with Amortization matching the number of terms is considered a **fully amortized** loan. A loan with **0% interest and amortization** would yield no interest payments (**Principal Only**), while a loan with an **interest rate and 0 amortization** would be an interest-only loan (**Interest Only – Revolving/LOC**).

The **Fixed Payment** option allows payment to be set with the amortization auto-calculated. If the payment is less than what is required to amortize the loan (Equally distributed payments) over the loan’s life, then the loan will be **partially amortized** (balloon payment with the last pay period). When the fixed payment amount is less than what is required to cover the interest-only payment, then it would be considered **negatively** **amortized** with Outstanding Interest being added with each subsequent recorded payment.

For more information about amortization, please refer to the Amortization and Payment documentation in the Bryt Knowledge base.

**How Bryt Calculates Interest:**

The principal balance (Loan Amount) is multiplied by the interest to get the amount of interest in a year, then it’s divided by 12 (months in a year). From there we get our interest per month and designate the interest accrual details such as periodic (30) or actual days (28/29/30/31), we divide those numbers to get our per diem. Once we have our per diem, we check the number of days (from the closing date or the number of days elapsed) to determine how much interest accrued and is to be paid.