Senior Financial Analyst & Excel Expert
Master your debt repayment with our professional amortization calculator excel with extra payments tool. Whether you are managing a mortgage or a car loan, this calculator mimics complex Excel formulas to show exactly how much interest you can save by paying just a little more each month.
Loan Parameters
Amortization Calculator Excel with Extra Payments Formula
To calculate the monthly payment ($M$), we use the standard fixed-rate amortization formula used by the Excel PMT function:
Variables Explained:
- P (Principal): The total amount of money borrowed.
- i (Monthly Interest): The annual rate divided by 12 (and divided by 100).
- n (Total Payments): The number of years multiplied by 12 months.
- Extra Payment: Added directly to the principal reduction each month.
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What is an Amortization Calculator Excel with Extra Payments?
This calculator is a financial modeling tool that mimics the behavior of a professional Excel spreadsheet. It determines the periodic payment amount for a loan and then illustrates how that payment is divided between interest costs and principal reduction over time.
The “Extra Payments” variable is the most powerful part of this tool. By applying extra funds directly to the loan principal, you bypass future interest charges. This effectively shortens the “life of the loan” and can save tens of thousands of dollars over the long term, especially on high-balance mortgages.
How to Calculate Amortization (Example)
- Determine Principal: Let’s say you have a $200,000 loan.
- Set the Rate: At 5% annual interest, your monthly rate is 0.004167.
- Calculate Base Payment: For 30 years, your payment is $1,073.64.
- Apply Extra: Add $100 extra. Your new monthly output is $1,173.64.
- Recalculate Schedule: Each month, the remaining balance drops faster, reducing the interest for the next month.
Frequently Asked Questions (FAQ)
Is it better to pay extra monthly or once a year? Monthly extra payments are generally better because the principal is reduced sooner, meaning interest stops accruing on that amount immediately.
Will my monthly payment change if I pay extra? No, your required monthly payment stays the same, but the number of months required to finish the loan decreases.
Does this calculator work for car loans? Yes, any fixed-rate installment loan (car, personal, or mortgage) follows this math.
Can I use this for interest-only loans? No, this tool is designed for amortizing loans where the balance eventually reaches zero.