Equal payment vs equal principal vs bullet: which is best?
Last updated: 2026-06-25
Total interest rises in the order equal principal < equal payment < bullet, while the early monthly burden rises as bullet < equal payment < equal principal.
To minimize total interest choose equal principal; to plan with a steady monthly amount choose equal payment; to reduce the early burden choose bullet.
The three methods at a glance
The first thing to decide when taking a loan is the repayment method. With the same principal, rate and term, your monthly burden and total interest change depending on how you repay. The three main methods are equal payment, equal principal and bullet.
| Category | Equal payment | Equal principal | Bullet |
|---|---|---|---|
| Monthly payment | Same each month | High early, then falls | Interest only (lowest) |
| Total interest | Medium | Lowest | Highest |
| Budgeting | Easy | High early burden | Lump-sum at maturity |
| Common uses | Mortgage / credit loan | When saving interest | Jeonse / short-term |
Equal payment
With equal payment, the total (principal + interest) you pay each month is the same until maturity. Early on, interest makes up a larger share and principal a smaller share, but as the balance falls over time, interest shrinks and principal grows. Because you pay the same amount each month, it is the easiest for household budgeting and is the most widely used for mortgages and credit loans.
The monthly payment formula is principal × monthly rate × (1+monthly rate)months ÷ ((1+monthly rate)months − 1), where the monthly rate is the annual rate divided by 12.
Equal principal
With equal principal, the principal you repay each month is the same, and interest applies only to the remaining balance, so it falls over time. The first month's payment is therefore the largest and declines slightly each month. Because the balance shrinks fast, this method has the lowest total interest of the three. It suits people who can handle the early burden and want to save on interest.
Bullet
With bullet repayment, you pay only interest during the loan term and repay the entire principal at maturity. The monthly burden is the lowest, but because the principal never falls, interest keeps accruing on the same amount, giving the highest total interest. It suits loans repaid with a deposit returned at maturity, like a jeonse deposit loan, or short-term loans where a lump sum is coming soon.
How to choose for your situation
- Want to save as much interest as possible → Equal principal. But the early monthly payment is large, so you need sufficient current income.
- Want a steady, predictable monthly amount → Equal payment. The simplest and easiest to plan.
- Want a lighter burden now and a lump-sum payoff later → Bullet. Suits short-term or jeonse deposit loans.
- Planning to repay early → For any method, check the early repayment fee and conditions in your agreement.
Compare it yourself
Numbers make the difference obvious. Put the same principal, rate and term into the Loan Interest Calculator and toggle between the three methods to see right away how the monthly payment and total interest change.
Frequently asked questions (FAQ)
Which repayment method has the lowest total interest?
By total interest alone, equal principal is the lowest because you repay the same principal each month and the balance falls fast. Next is equal payment, and bullet has the highest total interest.
Which method has the lowest early burden?
Bullet (interest only each month) has the lowest early monthly burden, equal payment is the same amount each month, and equal principal has the highest early burden. With steady income, equal payment fits; if early cash is tight, bullet is lighter.
Which method do mortgages usually use?
Equal payment is the most common for mortgages, and some borrowers choose equal principal to reduce total interest. Policy favors installment repayment (equal payment/principal), while bullet is mainly used for jeonse deposit or short-term loans.
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Last updated: 2026-06-25