As time goes on, more and more of each payment goes towards your principal (and you pay less in interest each month). We use the PMT function to calculate the monthly payment on a loan with an annual interest rate of 5%, a 2-year duration and a present value (amount borrowed) of $20,000. We have named the input cells. It takes 24 months to pay off this loan. See how the principal part increases and the interest part decreases with each payment. Your monthly loan payments don’t change; the math simply works out the ratios of debt and principal payments each month until the total debt is eliminated. This template is easy to download and print. Each free business plan template is available in Microsoft Word (DOC) format, and many of the Business Plan Forms are available in Excel (XLS) format as well. This means that at the end of year seven the loan can be paid off in full for the amount of $79,268.02. Typically mortgage lenders will have a balloon payment clause in the contract that will charge a fee for early payment.