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I'm not an accountant, but sans any other competent advice, here's how I would handle it.

First, the note specifies the interest rate. So interest has been accruing to now. You need to calculate that to determine the current loan balance.

Next, you have a payment. Calculate the amount of interest due at the documented rate for the current balance (see first step). That's your interest portion. Anything left over goes to the loan balance.

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