Debt amortization is a fundamental concept in personal finance and business. It refers to the process of paying off a debt over time through a series of regular payments. Each payment typically covers both the principal amount borrowed and the interest accrued on the outstanding balance. An amortization schedule is a table detailing each periodic payment, showing how much goes towards the principal and how much goes towards interest, as well as the remaining balance after each payment.
The Amortization Formula
The core of an amortization calculation is determining the fixed periodic payment. The standard formula for calculating the periodic payment (M) of an amortizing loan is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Periodic Payment
P = Principal Loan Amount
i = Periodic Interest Rate (Annual Rate / Number of Payments per Year)
n = Total Number of Payments (Loan Term in Years * Number of Payments per Year)
How the Calculator Works
Our Debt Amortization Calculator uses the formula above to first determine your fixed payment amount. It then iteratively calculates the breakdown of each payment:
Interest for the Period: Calculated on the outstanding balance from the previous period. Formula: Interest = Remaining Balance * Periodic Interest Rate (i)
Principal Paid: The portion of the fixed periodic payment that reduces the outstanding balance. Formula: Principal Paid = Periodic Payment (M) - Interest Paid
Remaining Balance: The balance after the current payment is applied. Formula: Remaining Balance = Previous Remaining Balance - Principal Paid
This process is repeated for the total number of periods (n) until the remaining balance reaches zero (or very close to it due to rounding).
Use Cases
This calculator is invaluable for:
Mortgages: Understanding how your monthly mortgage payment is allocated and how long it will take to pay off your home loan.
Car Loans: Visualizing the repayment schedule for your vehicle financing.
Personal Loans: Planning the repayment strategy for any type of installment loan.
Debt Payoff Planning: Comparing different loan scenarios to find the most efficient way to become debt-free.
By using this calculator, you gain clarity on your debt obligations, helping you make informed financial decisions and manage your money more effectively.
function calculateAmortization() {
var principal = parseFloat(document.getElementById("principal").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseInt(document.getElementById("loanTermYears").value);
var paymentFrequency = parseInt(document.getElementById("paymentFrequency").value);
// Input validation
if (isNaN(principal) || principal <= 0) {
alert("Please enter a valid initial 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(paymentFrequency) || paymentFrequency 0) {
periodicPayment = principal * (periodicInterestRate * Math.pow(1 + periodicInterestRate, numberOfPayments)) / (Math.pow(1 + periodicInterestRate, numberOfPayments) – 1);
} else {
// Handle zero interest rate
periodicPayment = principal / numberOfPayments;
}
// Round periodic payment to two decimal places
periodicPayment = parseFloat(periodicPayment.toFixed(2));
var remainingBalance = principal;
var amortizationData = [];
var currentTotalPaid = 0;
// Generate amortization schedule data
for (var i = 1; i <= numberOfPayments; i++) {
var interestForPeriod = remainingBalance * periodicInterestRate;
var principalPaidForPeriod = periodicPayment – interestForPeriod;
// Adjust last payment to ensure balance is exactly zero
if (i === numberOfPayments) {
principalPaidForPeriod = remainingBalance;
periodicPayment = principalPaidForPeriod + interestForPeriod; // Adjust final payment
}
remainingBalance -= principalPaidForPeriod;
if (remainingBalance < 0) { // Ensure balance doesn't go negative due to rounding
remainingBalance = 0;
}
amortizationData.push({
period: i,
payment: periodicPayment,
principalPaid: principalPaidForPeriod,
interestPaid: interestForPeriod,
remainingBalance: remainingBalance
});
totalInterest += interestForPeriod;
currentTotalPaid += periodicPayment;
}
// Display summary results
document.getElementById("periodicPayment").textContent = "$" + periodicPayment.toFixed(2);
document.getElementById("totalPaid").textContent = "$" + currentTotalPaid.toFixed(2);
document.getElementById("totalInterest").textContent = "$" + totalInterest.toFixed(2);
// Display amortization table
var tableBody = document.getElementById("amortizationTable").getElementsByTagName('tbody')[0];
tableBody.innerHTML = ''; // Clear previous table data
amortizationData.forEach(function(data) {
var row = tableBody.insertRow();
row.insertCell(0).textContent = data.period;
row.insertCell(1).textContent = "$" + data.payment.toFixed(2);
row.insertCell(2).textContent = "$" + data.principalPaid.toFixed(2);
row.insertCell(3).textContent = "$" + data.interestPaid.toFixed(2);
row.insertCell(4).textContent = "$" + data.remainingBalance.toFixed(2);
});
}