Understand how your loan or investment is paid off over time.
Monthly Payment: –
Total Interest Paid: –
Total Principal Paid: –
Total Paid: –
Amortization Schedule
Month
Beginning Balance
Payment
Principal Paid
Interest Paid
Ending Balance
Understanding Amortization Schedules
An amortization schedule is a table that details the breakdown of each periodic payment for a loan or an investment over its entire term. It shows how much of each payment goes towards the principal and how much goes towards interest, as well as the remaining balance after each payment. This transparency is crucial for borrowers and lenders alike to track progress and understand the true cost of borrowing or the growth of an investment.
How Amortization Works
Amortization typically involves a fixed periodic payment that covers both principal and interest. In the early stages of a loan, a larger portion of the payment goes towards interest because the outstanding principal balance is high. As the principal is gradually paid down, the interest portion of subsequent payments decreases, and more of the payment is applied to the principal.
The Math Behind the Schedule
The calculation of an amortization schedule relies on several key formulas:
Monthly Interest Rate (i): This is derived from the annual interest rate.
i = (Annual Interest Rate) / 12 / 100
Number of Payments (n): This is the total number of payments over the loan's life.
n = (Loan Term in Years) * 12
Monthly Payment (M): This is calculated using the loan principal (P), monthly interest rate (i), and number of payments (n). The formula is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Interest Paid for a Period: For each payment, the interest is calculated on the beginning balance for that period.
Interest Paid = Beginning Balance * i
Principal Paid for a Period: The portion of the payment that reduces the principal.
Principal Paid = Monthly Payment - Interest Paid
Ending Balance: The balance remaining after a payment.
Ending Balance = Beginning Balance - Principal Paid
Components of the Calculator
Initial Value (e.g., Loan Principal): The total amount borrowed or invested at the start.
Annual Rate (%): The yearly interest rate charged on the loan or earned on the investment.
Term (Years): The total duration of the loan or investment in years.
Interpreting the Results
The calculator provides:
Monthly Payment: The fixed amount you'll pay each month.
Total Interest Paid: The cumulative interest paid over the entire loan term.
Total Principal Paid: The cumulative amount of principal paid (which, for a loan, will equal the initial principal).
Total Paid: The sum of all payments made, including principal and interest.
The detailed schedule shows the progression month by month, illustrating how the loan is systematically paid down.
Use Cases
Amortization schedules are vital for:
Mortgages: Understanding how home loan payments are structured.
Auto Loans: Tracking payments for vehicle financing.
Personal Loans: Managing installment debt.
Investments: Visualizing the growth of compound interest over time, especially in annuity-like savings plans.
Financial Planning: Making informed decisions about taking on debt or setting up savings goals.
function generateAmortization() {
var principalAmount = parseFloat(document.getElementById("principalAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
// Input validation
if (isNaN(principalAmount) || principalAmount <= 0) {
alert("Please enter a valid Initial Value.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid Annual Rate (cannot be negative).");
return;
}
if (isNaN(loanTermYears) || loanTermYears 0) {
monthlyPayment = principalAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// If interest rate is 0, payment is just principal divided by number of payments
monthlyPayment = principalAmount / numberOfPayments;
}
var totalInterestPaid = 0;
var totalPrincipalPaid = 0;
var currentBalance = principalAmount;
var amortizationTableBody = document.getElementById("amortizationTableBody");
amortizationTableBody.innerHTML = ""; // Clear previous results
// Generate amortization table rows
for (var i = 1; i currentBalance) {
principalPayment = currentBalance;
monthlyPayment = principalPayment + interestPayment; // Adjust monthly payment if it's the last payment
}
currentBalance -= principalPayment;
// Ensure ending balance is not negative due to floating point inaccuracies
if (currentBalance < 0) {
currentBalance = 0;
}
totalInterestPaid += interestPayment;
totalPrincipalPaid += principalPayment;
var row = amortizationTableBody.insertRow();
row.insertCell(0).textContent = i;
row.insertCell(1).textContent = formatCurrency(principalAmount – totalPrincipalPaid + principalPayment); // Beginning Balance
row.insertCell(2).textContent = formatCurrency(monthlyPayment); // Payment
row.insertCell(3).textContent = formatCurrency(principalPayment); // Principal Paid
row.insertCell(4).textContent = formatCurrency(interestPayment); // Interest Paid
row.insertCell(5).textContent = formatCurrency(currentBalance); // Ending Balance
}
// Display summary results
var totalPaid = principalAmount + totalInterestPaid; // For a loan, total paid should ideally be principal + total interest
document.getElementById("monthlyPayment").textContent = formatCurrency(monthlyPayment);
document.getElementById("totalInterest").textContent = formatCurrency(totalInterestPaid);
document.getElementById("totalPrincipal").textContent = formatCurrency(principalAmount); // For a loan, total principal paid is the original principal
document.getElementById("totalPaid").textContent = formatCurrency(totalPaid);
document.getElementById("amortizationTableContainer").style.display = "block";
}
function formatCurrency(amount) {
if (isNaN(amount)) {
return "$–.–";
}
return "$" + amount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}
// Initialize calculator on page load with default values
document.addEventListener('DOMContentLoaded', function() {
generateAmortization();
});