Amortization Calculator

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Annual Interest Rate (%)

Loan Term

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About Amortization Calculator

The Amortization Calculator helps you understand how your loan or mortgage payments are applied to principal and interest over time. It creates a detailed amortization schedule that shows how each payment reduces your loan balance until it's fully paid off.

How Amortization Works

Payment Distribution

Each of your loan payments consists of two parts:

Principal: The portion of the payment that reduces your loan balance.
Interest: The cost of borrowing money, calculated based on your remaining loan balance.

At the beginning of your loan term, a larger portion of each payment goes toward interest. As you pay down the principal, more of each payment will go toward reducing the principal balance.

Amortization Formula

The monthly payment for an amortized loan is calculated using this formula:

Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ-1]

Where:

P = Principal (loan amount)
r = Periodic interest rate (annual rate divided by payment periods per year)
n = Total number of payments

Understanding Your Amortization Schedule

Payment Number: The sequential number of each payment.
Payment Date: The date when each payment is due.
Payment Amount: The total amount paid for each period (principal + interest + any extra payment).
Principal: The portion of the payment that reduces the loan balance.
Interest: The portion of the payment that is the cost of borrowing.
Remaining Balance: The loan amount still owed after each payment.

Benefits of Making Extra Payments

Save on Interest

Making extra payments reduces your principal faster, which means less interest over the life of the loan. Even small extra payments can save thousands in interest.

Shorter Loan Term

Extra payments can significantly reduce the time it takes to pay off your loan. For example, an extra $100 monthly on a 30-year mortgage could pay it off several years early.

Build Equity Faster

For home loans, extra payments help you build equity in your property more quickly, giving you greater financial flexibility.

Note:

This calculator assumes a fixed interest rate for the entire loan term and that all payments are made on time. Actual loan terms may vary, and some loans may have prepayment penalties. Always consult with your lender for specific terms and conditions of your loan.