They paid you back part of it. Does that reduce the principal?
You lent $5,000. A few months later $1,000 comes back. Do they now owe $4,000?
It depends. And that dependency is one of the quietest sources of conflict there is, because both answers seem obvious — each to a different person.
Two ways to apply a payment
Interest first, then principal. The payment clears accumulated interest, and only the surplus reduces the principal. This is what banks do and what most formal loan agreements specify.
Straight to principal. The payment reduces the principal in full, and interest keeps accumulating separately.
Under the first, the principal falls more slowly, so it keeps generating more interest. Under the second it falls faster. Over a long loan the gap becomes substantial.
Which one is right
If interest is accumulating separately — a real, collectible debt that exists today — it is natural for a payment to clear it first. It is the matured obligation, so it gets paid before the one that has not matured.
If interest joins the principal at month end, then this month's interest is not yet collectible: it is on its way to becoming principal. A mid-month payment therefore goes entirely against principal.
In Prestalo you do not decide this on every movement. It follows from how the loan is configured and applies the same way every time — which is precisely what a spreadsheet gets wrong, because there the decision is made afresh on every row.
The part you cannot skip
Whatever the rule, what matters is being able to see the split. When you record a repayment, the movement line states how much went to interest and how much to principal.
That turns one of the harshest possible conversations — "I paid you a thousand and you're telling me I still owe almost the same?" — into something you settle by pointing at a line. Nobody has to take anyone's word for it or redo the arithmetic.
Practical advice
If you are going to accept partial repayments, decide the rule before the first one, not after.
Once money has arrived, any rule you pick will look like it was chosen for your own benefit — and honestly, it may have been, without you intending it.
Deciding beforehand costs one sentence. Deciding afterwards costs an argument.