Learn
How farm loan amortization actually works
Four numbers decide almost everything about a term loan: the balance, the rate, how often you pay, and how many payments are left.
The periodic rate is the one people skip
An annual rate is not what gets applied to your balance. It is divided by the number of payments in a year to give a periodic rate: monthly is twelve, quarterly four, semiannual two, annual one. A 7.85% loan paid annually applies 7.85% once. The same headline rate paid monthly applies roughly 0.654% twelve times.
Canadian loans add a wrinkle worth naming. Where a rate is quoted as nominal compounded semiannually, the periodic rate is not the annual rate divided by the payment count. LoanHank stores the documented convention explicitly and, when the document does not state it, stops rather than assuming one.
Where the payment comes from
For a standard fully amortizing fixed-rate loan the payment satisfies one relationship: the present value of every remaining payment, discounted at the periodic rate, equals the balance today. That is the whole formula. A zero-rate loan collapses to the balance divided by the number of payments.
Why early payments feel like they do nothing
Each payment covers the interest accrued that period first, and only the remainder reduces principal. Early in a schedule the interest share is large because the balance is large, so principal moves slowly. The same payment late in the schedule is almost entirely principal. Nothing is being withheld from you; that is simply the arithmetic of a constant payment against a shrinking balance.
What this means for reading a statement
If a stated payment does not match a standard amortization of the stated balance, rate, and remaining periods, something else is present: a balloon, financed fees, an interest-only period, a variable rate that has moved, or a misread figure. LoanHank flags that mismatch and asks you rather than quietly picking an interpretation.