An amortization calculator helps you understand how loan payments are structured over time. Each payment you make on a loan (like a mortgage, car loan, or personal loan) consists of two parts: principal and interest. Initially, a larger portion of your payment goes towards interest, and a smaller portion goes towards reducing the principal balance. As time goes on, this ratio shifts, with more of your payment applied to the principal.
The Math Behind Amortization
The standard monthly payment (M) for an amortizing loan is calculated using the following formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = Principal loan amount
i = Monthly interest rate (Annual rate / 12)
n = Total number of payments (Loan term in years * 12)
How Extra Payments Accelerate Payoff
Making extra payments on your loan is a powerful strategy to save money on interest and pay off your debt faster. When you pay more than the scheduled monthly amount, the additional money is typically applied directly to the principal balance. This has a compounding effect:
Reduces Principal Faster: A lower principal balance means less interest accrues in the subsequent months.
Shortens Loan Term: By consistently reducing the principal faster, you reach a zero balance sooner than originally scheduled.
Saves Interest: The less time your money is borrowed, and the lower the principal balance, the less total interest you will pay over the life of the loan.
Using This Calculator
This calculator helps you visualize these benefits. Enter the following details:
Loan Amount: The total amount you borrowed.
Annual Interest Rate: The yearly interest rate of your loan.
Loan Term (Years): The original duration of your loan agreement.
Extra Monthly Payment: The additional amount you plan to pay each month above the standard payment.
The calculator will then provide:
Total Payments Made: The total number of payments required to pay off the loan with extra payments.
Total Interest Paid: The total interest paid over the life of the loan, including the effect of extra payments.
Total Principal Paid: The total principal repaid.
Original Estimated Payoff Time: The time it would take to pay off the loan without any extra payments.
Actual Payoff Time: The significantly shorter time it takes to pay off the loan with your specified extra payments.
Total Amount Paid: The sum of all payments made (principal + interest).
By comparing the "Original Estimated Payoff Time" with the "Actual Payoff Time," you can clearly see the impact of your extra payments. Use this tool to plan your financial strategy and take control of your debt!
function calculateAmortization() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseInt(document.getElementById("loanTermYears").value);
var extraPayment = parseFloat(document.getElementById("extraPayment").value);
var summaryLoanAmountSpan = document.getElementById("summaryLoanAmount");
var summaryInterestRateSpan = document.getElementById("summaryInterestRate");
var summaryLoanTermSpan = document.getElementById("summaryLoanTerm");
var summaryExtraPaymentSpan = document.getElementById("summaryExtraPayment");
summaryLoanAmountSpan.innerText = loanAmount.toFixed(2);
summaryInterestRateSpan.innerText = annualInterestRate.toFixed(2) + "%";
summaryLoanTermSpan.innerText = loanTermYears + " years";
summaryExtraPaymentSpan.innerText = "$" + extraPayment.toFixed(2);
var totalInterestPaid = 0;
var totalPrincipalPaid = 0;
var totalAmountPaid = 0;
var paymentCount = 0;
var totalPaymentsCount = 0;
var monthlyInterestRate = (annualInterestRate / 100) / 12;
var numberOfMonths = loanTermYears * 12;
// Calculate standard monthly payment (M)
var standardMonthlyPayment = 0;
if (monthlyInterestRate > 0) {
standardMonthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfMonths)) / (Math.pow(1 + monthlyInterestRate, numberOfMonths) – 1);
} else {
standardMonthlyPayment = loanAmount / numberOfMonths;
}
var currentBalance = loanAmount;
var payment = standardMonthlyPayment + extraPayment;
if (isNaN(loanAmount) || loanAmount <= 0) {
alert("Please enter a valid loan amount.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid annual interest rate.");
return;
}
if (isNaN(loanTermYears) || loanTermYears <= 0) {
alert("Please enter a valid loan term in years.");
return;
}
if (isNaN(extraPayment) || extraPayment 0.01) { // Using a small tolerance for floating point errors
paymentCount++;
var interestForMonth = currentBalance * monthlyInterestRate;
var principalForMonth = payment – interestForMonth;
// Adjust last payment if it exceeds remaining balance
if (principalForMonth > currentBalance) {
principalForMonth = currentBalance;
payment = interestForMonth + principalForMonth; // Adjust payment to actual needed
}
currentBalance -= principalForMonth;
totalInterestPaid += interestForMonth;
totalPrincipalPaid += principalForMonth;
totalAmountPaid += payment;
if (paymentCount > numberOfMonths * 2 && extraPayment > 0) { // Safety break for extremely long payoff or potential infinite loop with 0% interest and 0 extra payment
alert("Calculation may be taking too long. Please check your inputs.");
return;
}
if (paymentCount > numberOfMonths * 5) { // General safety break
alert("Calculation exceeded maximum iterations. Please check inputs.");
return;
}
}
totalPaymentsCount = paymentCount;
var originalMonthlyPayment = 0;
if (monthlyInterestRate > 0) {
originalMonthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfMonths)) / (Math.pow(1 + monthlyInterestRate, numberOfMonths) – 1);
} else {
originalMonthlyPayment = loanAmount / numberOfMonths;
}
var originalTotalInterest = (originalMonthlyPayment * numberOfMonths) – loanAmount;
document.getElementById("totalPayments").innerText = totalPaymentsCount;
document.getElementById("totalInterestPaid").innerText = "$" + totalInterestPaid.toFixed(2);
document.getElementById("totalPrincipalPaid").innerText = "$" + totalPrincipalPaid.toFixed(2);
document.getElementById("originalPayoffTime").innerText = numberOfMonths + " months (" + loanTermYears + " years)";
document.getElementById("actualPayoffTime").innerText = totalPaymentsCount + " months";
document.getElementById("totalAmountPaid").innerText = "$" + totalAmountPaid.toFixed(2);
}