Amortization Calculator
Generate a complete amortization schedule for any loan. View monthly breakdowns of principal, interest, and remaining balance with interactive charts.
About This Calculator
This Amortization Calculator generates a complete loan repayment schedule showing every monthly payment broken down into principal and interest components. Understanding your amortization schedule helps you make informed decisions about prepayments and loan management.
The calculator provides the monthly payment amount, total interest, and a full schedule for the first 12 months plus yearly balance trends.
Amortization Formula:
Monthly Payment = P x r x (1+r)^n / [(1+r)^n - 1]
Key Insights:
- Front-loaded interest: Most interest is paid in early years
- Accelerating equity: Principal repayment accelerates over time
- Prepayment benefit: Extra payments save the most interest when made early
- Tenure impact: Shorter tenure = higher payment but less total interest
Frequently Asked Questions
What is loan amortization?
Loan amortization is the process of paying off a loan through regular fixed payments over time. Each payment covers both interest and principal. As the loan matures, the interest portion decreases and the principal portion increases, while the total payment remains constant.
How to read an amortization schedule?
An amortization schedule shows each payment period with the payment amount, how much goes to interest, how much goes to principal, and the remaining balance. Early payments have more interest; later payments have more principal. Our calculator shows the first 12 months in detail.
What is the amortization formula?
Monthly Payment = P x r x (1+r)^n / [(1+r)^n - 1]. Interest for a period = balance x monthly rate. Principal = payment - interest. New balance = old balance - principal. This repeats each month until the balance reaches zero.
How does extra payment affect amortization?
Extra payments directly reduce the principal balance, which reduces future interest charges. Even a small extra payment each month can shorten the loan term by years and save thousands in interest. Our calculator shows how interest decreases as principal is paid down.
Why is interest higher in early years?
Interest is calculated on the outstanding balance. In early years, the balance is highest, so more of each payment goes to interest. As the balance decreases, the interest portion shrinks and more of the payment goes toward principal. This is standard for amortizing loans.
What is the difference between amortizing and interest-only loans?
Amortizing loans: Each payment reduces both interest and principal, eventually paying off the loan. Interest-only loans: You pay only interest for a set period (no principal reduction), then payments increase to cover both. Amortizing is standard for mortgages and most consumer loans.
How does interest rate affect amortization?
Higher interest rates mean more of each payment goes to interest, slowing principal reduction. At 6%, a 30-year mortgage pays off in 30 years. At 8%, the same payment schedule would leave a substantial balance at year 30, requiring either higher payments or a balloon payment.
What is negative amortization?
Negative amortization occurs when your monthly payment is less than the interest due, causing the unpaid interest to be added to the principal balance. This increases your loan balance over time instead of decreasing it. It's associated with certain risky loan products and should generally be avoided.