Amortization Calculator

An amortization schedule is a table showing each loan payment broken down into principal and interest portions over the entire loan term. Early payments are mostly interest, while later payments go primarily toward principal. This schedule helps you see exactly how your loan balance decreases over time.

Monthly payment is calculated using the formula: M = P × [r(1+r)^n] / [(1+r)^n-1], where P is principal, r is monthly interest rate (annual rate ÷ 12), and n is total number of payments. For a $200,000 loan at 6% for 30 years: M = $200,000 × [0.005(1.005)^360] / [(1.005)^360-1] = $1,199.10.

Interest is calculated on the remaining balance. With a large initial balance, you owe more interest. As you pay down principal, less interest accrues each month, so more of your fixed payment goes toward principal. On a 30-year mortgage, you might pay 80% interest in year one but only 5% interest in year 30.

Extra payments go directly toward principal, reducing your balance faster and saving interest. For example, adding $100/month to a $200,000 mortgage at 6% can save over $50,000 in interest and pay off the loan 5+ years early. Even one extra payment per year makes a significant difference.

Amortized loans have fixed payments with changing principal/interest portions over time. Simple interest loans calculate interest only on the original principal. Car loans and mortgages typically use amortization, while short-term personal loans may use simple interest. Amortized loans front-load interest costs.