If it is a housing loan, I think the interest is added annually. Eg. if you take a loan of 100K at an interest of 4% means for the first year the outstanding balance is 104K. After a year, you paid, say 12K in instalments. As 4K is the interest so you have paid 8K on the principal amount. So, after a year the principal balance is 92K and another year's interest is added so the outstanding balance for the next year is RM95680 ( 4% of 92K as the pricipal owing is 92K now ). Another year passed and you paid another 12K in instalments and  RM3680 being the interest you have paid off RM8320 of the principal amount meaning your outstanding principal is now RM83680 and the next's year interest (depending on bank's rate) is added to make the outstanding blance for next year. Most banks penalised those who settles early (within a span of 5 years, I think ).