Amortization Schedule
| Month | Payment | Interest Paid | Principal Paid | Remaining Balance |
|---|
Loan Summary
"; amortizationResultHTML += "Monthly Payment: $" + monthlyPayment.toFixed(2) + ""; amortizationResultHTML += "Total Interest Paid: $" + totalInterestPaid.toFixed(2) + ""; amortizationResultHTML += "Total Amount Paid: $" + totalPayment.toFixed(2) + ""; document.getElementById("amortizationResult").innerHTML = amortizationResultHTML; var tableBody = document.getElementById("amortizationTable").getElementsByTagName("tbody")[0]; tableBody.innerHTML = ""; // Clear previous table data var remainingBalance = principalAmount; for (var i = 0; i < numberOfMonths; i++) { var interestPaid = remainingBalance * monthlyInterestRate; var principalPaid = monthlyPayment – interestPaid; remainingBalance -= principalPaid; if (remainingBalance < 0.01) { // Handle minor floating point inaccuracies remainingBalance = 0; } var row = tableBody.insertRow(); var cellMonth = row.insertCell(0); var cellPayment = row.insertCell(1); var cellInterest = row.insertCell(2); var cellPrincipal = row.insertCell(3); var cellBalance = row.insertCell(4); cellMonth.innerHTML = (i + 1); cellPayment.innerHTML = "$" + monthlyPayment.toFixed(2); cellInterest.innerHTML = "$" + interestPaid.toFixed(2); cellPrincipal.innerHTML = "$" + principalPaid.toFixed(2); cellBalance.innerHTML = "$" + remainingBalance.toFixed(2); } document.getElementById("amortizationTableContainer").style.display = 'block'; }Understanding Loan Amortization
Loan amortization is the process of paying off a debt over time through regular, scheduled payments. Each payment you make towards a loan, such as a mortgage or an auto loan, typically consists of two parts: interest and principal. Understanding how amortization works is crucial for borrowers to grasp the true cost of their loan and how their payments are applied.
How Amortization Works
At the beginning of a loan term, a larger portion of your payment goes towards paying the interest that has accrued. As you continue to make payments, the principal balance decreases, which in turn reduces the amount of interest charged for subsequent periods. Consequently, over the life of the loan, a greater percentage of your payment is allocated to reducing the principal.
The standard amortization formula calculates the fixed periodic payment required to pay off a loan over a specified term at a fixed interest rate. The formula is as follows:
$M = P \left[ \frac{r(1+r)^n}{(1+r)^n – 1} \right]$
Where:
- $M$ = Monthly Payment
- $P$ = Principal Loan Amount
- $r$ = Monthly Interest Rate (Annual Rate / 12)
- $n$ = Total Number of Payments (Loan Term in Years * 12)
Key Components of an Amortization Schedule
An amortization schedule is a table that breaks down each payment over the life of the loan. It typically includes:
- Month: The payment number in the sequence.
- Payment: The fixed amount paid each period.
- Interest Paid: The portion of the payment that covers the interest accrued since the last payment.
- Principal Paid: The portion of the payment that reduces the outstanding loan balance.
- Remaining Balance: The amount of debt still owed after the payment is applied.
Why Use an Amortization Calculator?
Our amortization calculator helps you visualize how your loan will be repaid. By inputting the principal amount, annual interest rate, and loan term, you can instantly see your estimated monthly payment, the total interest you'll pay over the life of the loan, and the total amount repaid. Furthermore, it generates a detailed amortization schedule, offering transparency into each payment's breakdown and the declining loan balance. This tool is invaluable for financial planning, budgeting, and making informed decisions about taking on debt.
Example Scenario:
Imagine you are taking out a loan of $200,000 at an annual interest rate of 5% for a term of 30 years.
- Principal Loan Amount: $200,000
- Annual Interest Rate: 5%
- Loan Term: 30 Years
Using the calculator, you would find that your estimated monthly payment is approximately $1,073.64. Over the 30-year term, you would pay roughly $186,510.40 in interest, bringing the total amount repaid to approximately $386,510.40. The detailed schedule would show how, in the early months, a larger portion of your $1,073.64 payment goes towards interest, and how this shifts over time to pay down the principal more aggressively.