Find Amortization Calculator

Calculate your loan payments and understand your repayment schedule.

Loan Amortization Calculator

Amortization Schedule

Monthly breakdown of loan payments

Month	Payment	Principal	Interest	Balance

Loan Payment Distribution

What is an Amortization Schedule?

An amortization schedule is a table that details each periodic payment on an amortizing loan (like a mortgage or auto loan). For each payment, it shows how much is applied to the principal balance and how much goes towards interest. It also shows the remaining balance after each payment. Essentially, it's a roadmap for how your loan will be paid off over time. Understanding your amortization schedule is crucial for financial planning, as it reveals the true cost of borrowing and how your payments are allocated.

Who should use it? Anyone taking out a loan that is repaid in regular installments over time, including mortgages, auto loans, personal loans, and business loans. It's particularly useful for understanding the long-term implications of interest charges.

Common misconceptions: A common misconception is that early loan payments are mostly interest. While this is true for many loans, the exact proportion depends on the interest rate and loan term. Another misconception is that the total interest paid is fixed; it can change if you make extra payments or refinance. This amortization calculator helps clarify these points.

Amortization Formula and Mathematical Explanation

The core of an amortization calculator lies in its ability to compute the fixed periodic payment and then break down each payment into principal and interest components. The most common formula used is for calculating the periodic payment (M) of an annuity:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where:

• M = Periodic Payment (e.g., monthly payment)
• P = Principal Loan Amount (the initial amount borrowed)
• i = Periodic Interest Rate (annual interest rate divided by the number of periods per year)
• n = Total Number of Payments (loan term in years multiplied by the number of periods per year)

Once the monthly payment (M) is determined, each subsequent payment is calculated as follows:

• Interest Paid for the Period = Remaining Balance * i
• Principal Paid for the Period = M – Interest Paid for the Period
• New Remaining Balance = Remaining Balance – Principal Paid for the Period

This process is repeated for each period until the balance reaches zero.

Variables Table

Amortization Variables Explained

Variable	Meaning	Unit	Typical Range
P (Principal)	The initial amount of money borrowed.	Currency (e.g., USD)	$1,000 – $1,000,000+
Annual Interest Rate	The yearly rate charged on the loan.	Percentage (%)	0.1% – 30%+
i (Periodic Rate)	The interest rate applied per payment period (Annual Rate / 12 for monthly).	Decimal (e.g., 0.05 / 12)	0.0001 – 0.025+
Loan Term (Years)	The total duration of the loan in years.	Years	1 – 30+
n (Total Payments)	The total number of payments over the loan's life (Term in Years * Periods per Year).	Count	12 – 360+
M (Periodic Payment)	The fixed amount paid each period.	Currency (e.g., USD)	Varies greatly based on P, i, n

Practical Examples (Real-World Use Cases)

Example 1: Buying a Home

Sarah is purchasing a home and needs a mortgage. She's looking at a loan of $300,000 with an annual interest rate of 6.5% over 30 years.

• Loan Amount (P): $300,000
• Annual Interest Rate: 6.5%
• Loan Term: 30 years

Using the amortization calculator:

• Monthly Payment (M): Approximately $1,896.20
• Total Interest Paid: Approximately $382,631.57
• Total Amount Paid: Approximately $682,631.57

Financial Interpretation: Sarah will pay nearly as much in interest over the life of the loan as the original principal amount. The amortization schedule would show that in the early years, a larger portion of her $1,896.20 payment goes towards interest, while later payments apply more to the principal.

Example 2: Purchasing a Car

John is buying a new car and financing $25,000. The dealership offers him a 5-year loan (60 months) at an 8% annual interest rate.

• Loan Amount (P): $25,000
• Annual Interest Rate: 8%
• Loan Term: 5 years

Using the amortization calculator:

• Monthly Payment (M): Approximately $528.28
• Total Interest Paid: Approximately $6,696.80
• Total Amount Paid: Approximately $31,696.80

Financial Interpretation: John will pay over $6,600 in interest for his car loan. The calculator's schedule would illustrate how the principal portion of his $528.28 payment gradually increases over the 60 months.

How to Use This Amortization Calculator

Our Amortization Calculator is designed for simplicity and accuracy. Follow these steps:

1. Enter Loan Amount: Input the total principal amount you are borrowing.
2. Enter Annual Interest Rate: Provide the yearly interest rate as a percentage (e.g., type '5' for 5%).
3. Enter Loan Term: Specify the loan duration in years.
4. Click 'Calculate': The calculator will instantly display your estimated monthly payment, total principal, total interest, and total amount paid.
5. Review the Schedule: Scroll down to see the detailed amortization table, showing each month's payment breakdown and remaining balance.
6. Visualize with Chart: Examine the chart to visually understand the proportion of principal versus interest paid over time.
7. Use 'Reset': Click 'Reset' to clear all fields and enter new loan details.
8. Copy Results: Use the 'Copy Results' button to easily transfer the key figures and assumptions to another document or note.

How to read results: The primary result is your fixed monthly payment. The total interest paid highlights the cost of borrowing. The amortization schedule helps you see how the loan balance decreases and how the interest portion of your payment shrinks over time.

Decision-making guidance: Use the calculator to compare different loan scenarios. For instance, see how a slightly lower interest rate or a shorter loan term significantly impacts the total interest paid. This tool empowers you to make informed borrowing decisions.

Key Factors That Affect Amortization Results

Several factors significantly influence your loan's amortization schedule and overall cost:

1. Principal Loan Amount: A larger loan amount naturally leads to higher monthly payments and greater total interest paid, assuming other factors remain constant.
2. Interest Rate: This is one of the most critical factors. Even small differences in the annual interest rate can result in tens or hundreds of thousands of dollars difference in total interest paid over the life of a long-term loan like a mortgage. Higher rates mean more interest paid each period.
3. Loan Term (Duration): A longer loan term spreads payments over more time, resulting in lower monthly payments but significantly higher total interest paid. Conversely, a shorter term increases monthly payments but drastically reduces the total interest burden.
4. Payment Frequency: While this calculator assumes monthly payments, making extra payments or opting for bi-weekly payments (if offered by the lender) can accelerate principal reduction and save on interest.
5. Extra Payments: Making payments above the required minimum, especially early in the loan term, can significantly reduce the total interest paid and shorten the loan duration. Ensure extra payments are applied directly to the principal.
6. Fees and Charges: Loan origination fees, closing costs, and other administrative charges associated with the loan aren't typically part of the core amortization calculation but add to the overall cost of borrowing.
7. Inflation: While not directly in the calculation, inflation erodes the purchasing power of money. This means future payments, while fixed in nominal terms, become less burdensome in real terms over time due to inflation.
8. Taxes and Insurance (for Mortgages): For mortgages, the monthly payment often includes property taxes and homeowner's insurance (escrow). These amounts are separate from principal and interest and can change annually, affecting the total outflow, though not the amortization of the loan itself.

Frequently Asked Questions (FAQ)

What is the difference between principal and interest?

Principal is the original amount of money borrowed. Interest is the cost charged by the lender for the use of that money, calculated as a percentage of the outstanding principal balance.

Does the monthly payment change with an amortization schedule?

For standard amortizing loans (like fixed-rate mortgages), the total monthly payment remains constant. However, the *proportion* of that payment allocated to principal and interest changes each month. Initially, more goes to interest; later, more goes to principal.

Can I use this calculator for loans other than mortgages?

Yes, this amortization calculator is suitable for any loan with regular, fixed payments over a set term, including auto loans, personal loans, and business loans.

What happens if I make an extra payment?

Making an extra payment, especially one designated to go towards the principal, will reduce your outstanding loan balance faster. This typically leads to paying less total interest over the life of the loan and potentially shortening the loan term.

How does a variable interest rate affect amortization?

This calculator assumes a fixed interest rate. Loans with variable rates have interest rates that can change over time, meaning your monthly payment amount (or the principal/interest split) could fluctuate, making a fixed amortization schedule inaccurate.

What is negative amortization?

Negative amortization occurs when your loan payment doesn't cover the interest accrued for that period. The unpaid interest is added to the principal balance, meaning you end up owing more than you originally borrowed. This is uncommon for standard loans but can happen with certain adjustable-rate mortgages or interest-only loans under specific conditions.

How can I calculate the total interest paid over the loan's life?

The total interest paid is simply the total amount repaid (Monthly Payment * Number of Payments) minus the original loan principal amount. Our calculator provides this figure directly.

What is the best loan term to choose?

The "best" loan term depends on your financial goals. Shorter terms mean higher monthly payments but less total interest paid. Longer terms mean lower monthly payments but significantly more interest paid. Consider your budget and long-term savings goals when choosing.