Amortization refers to the process of paying off a debt over time through regular, scheduled payments. Each payment consists of both principal and interest. As you make payments, a portion goes towards reducing the outstanding principal amount, and the rest covers the interest accrued since the last payment. An amortization schedule details how each payment is allocated and how the loan balance decreases over its life.
How the Calculator Works
This calculator uses a standard formula to determine your monthly loan payment and then generates an amortization summary. The core components are:
Loan Amount (Principal): The initial amount borrowed.
Annual Interest Rate: The yearly rate charged by the lender. This is converted to a monthly rate for calculations (Annual Rate / 12).
Loan Term (Years): The total duration of the loan in years. This is converted to months for calculations (Years * 12).
The Monthly Payment Formula (M)
The monthly payment is calculated using the following formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment
P = Principal Loan Amount
i = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Payments (Loan Term in Years * 12)
Amortization Summary Calculation
Monthly Payment: Calculated using the formula above.
Total Paid: Monthly Payment * Total Number of Payments.
Total Interest Paid: Total Paid – Loan Amount.
Use Cases
This calculator is useful for:
Estimating monthly payments for mortgages, auto loans, personal loans, and other types of debt.
Understanding the total cost of borrowing, including interest.
Comparing different loan options by varying loan amounts, interest rates, and terms.
Financial planning and budgeting.
function calculateAmortization() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseInt(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
var totalPaidSpan = document.getElementById("totalPaid");
var totalInterestSpan = document.getElementById("totalInterest");
var monthlyPaymentSpan = document.getElementById("monthlyPayment");
// Clear previous results
totalPaidSpan.textContent = "$0.00";
totalInterestSpan.textContent = "$0.00";
monthlyPaymentSpan.textContent = "$0.00";
if (isNaN(loanAmount) || loanAmount <= 0 ||
isNaN(annualInterestRate) || annualInterestRate < 0 ||
isNaN(loanTermYears) || loanTermYears <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
var monthlyInterestRate = (annualInterestRate / 100) / 12;
var numberOfPayments = loanTermYears * 12;
var monthlyPayment;
if (monthlyInterestRate === 0) {
monthlyPayment = loanAmount / numberOfPayments;
} else {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
var totalPaid = monthlyPayment * numberOfPayments;
var totalInterest = totalPaid – loanAmount;
// Format currency
var formatCurrency = function(amount) {
return "$" + amount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
};
monthlyPaymentSpan.textContent = formatCurrency(monthlyPayment);
totalPaidSpan.textContent = formatCurrency(totalPaid);
totalInterestSpan.textContent = formatCurrency(totalInterest);
}