Answer:
C. Paying more of the principal reduces the amount of interest due.
Explanation:
In amortization payments, priority is given to interest payments. Lenders dedicate a high percentage of monthly repayment to interest in the first years of amortization. Since interest is based on the loan balances, the interest payments will be high if the principal amount remains high.
If a customer makes extra payments that reduce the principal amounts, the interest due will automatically reduce. Paying-off a loan early that the amortization schedule will therefore save a customer on interest payments.
