I'm trying to make sense of how one goes about paying off a loan, or more specifically how one goes about paying interest alongside principal. Is your monthly/yearly interest included in the payment of your monthly/yearly ect disbursement, or is it something optional you can pay separate e.g. before it become capitalized?

It depends on where you get your loan. Banks often calculate the interest every 3 months and add it on to the principal ..... so you may feel it is three steps forward and one step back.

Credit unions add it on to each repayment. The interest part is taken first and the rest of the repayment comes off the loan balance. It isn't optional, but often it is allowed to make extra payments to bring the capital amount down faster ..... and that will ultimately mean less interest. You only pay interest on the amount you owe.

Payments include prin/int

It is part of the monthly payment.

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