Amortization Calculator

How Loan Amortization Really Works

Every fixed payment is split between interest and principal — and that split shifts dramatically over the life of your loan. This calculator shows the exact payment, the total interest, and a full year-by-year schedule so you can see where every dollar goes. For a related calculation, 10/1 ARM Calculator may also be useful.

What This Calculator Does

It works for any fixed-rate installment loan. You enter the amount, rate, term, and an optional extra payment, and choose a payment frequency — monthly, bi-weekly, weekly, or quarterly.

In return you get the periodic payment, total interest, payoff time, a balance-and-interest chart, and a printable year-by-year schedule.

The real value is what it makes visible: early payments are mostly interest, and only later does the balance drop quickly. Add an extra payment and it instantly shows the interest saved and years shaved off.

Because it also compares a bi-weekly, weekly, or quarterly schedule against a standard monthly one, you can see how a small change in payment timing shifts the total interest — a feature most basic amortization tools skip entirely.

How to Use It

1. 1

   Enter the loan amount

   The principal you're borrowing — purchase price minus your down payment for a mortgage, or the financed amount for a car loan.

2. 2

   Add the interest rate

   Your quoted annual rate, entered as a number like 6 for 6%. Take it straight from your loan offer.

3. 3

   Set the term in months

   30 years is 360 months, 15 years is 180, a typical car loan is 60 or 72. Multiply any term in years by 12.

4. 4

   Try an extra payment

   Add any amount you'd pay above the minimum. It goes straight to principal — and the calculator shows the months it saves.

28/36 Rule Calculator covers similar ground if that's what you're after.

The Formula Behind It

A 6% annual rate becomes 0.005 per month. Once the payment is set, each month the interest equals your current balance × that monthly rate, and everything left over reduces the principal.

As the balance shrinks, the interest slice shrinks too — so more of the same payment attacks principal every month.

A Worked Example

Take a $300,000 mortgage at 6.5% over 30 years. Here's exactly what the calculator returns:

Over 30 years, the interest ($382,633) exceeds the amount borrowed — a direct result of how amortization front-loads interest.

A similar approach is used in APR Calculator.

Where Each Payment Goes

The same $1,896 payment splits very differently across the life of the loan:

Month one is about 86% interest, with only $271 reducing the balance. By the final payment, almost the entire amount is principal — which is why early years build so little equity.

Why Interest Is Front-Loaded

The lopsided early split isn't a trick by lenders — it falls directly out of the math. Interest is charged on whatever you still owe, and at the start you owe the most. So the first month's interest is large, leaving little of the fixed payment for principal.

Each month you pay the balance down a little, so the next month's interest is slightly smaller, which frees slightly more for principal. That effect compounds. It starts almost imperceptibly and then accelerates, which is why the balance seems stuck for years and then falls quickly near the end.

Understanding this changes behavior. It explains why refinancing late in a loan resets you to the interest-heavy part of a new schedule, and why an extra payment early — when the balance is highest — removes far more future interest than the same payment made years later.

Comparing Loan Terms

The same $300,000 loan looks completely different depending on the term you choose:

The 15-year borrower pays about $591 more each month — and saves roughly $235,000 in total interest. That trade-off is the single most important decision in a mortgage.

Understanding Your Results

Monthly payment is principal and interest only — it excludes property taxes, insurance, HOA dues, and mortgage insurance, which lenders often bundle into a larger total.

Total interest is the sum of every interest portion; on long mortgages it can exceed the amount borrowed. Payoff time equals your term unless extra payments shorten it.

The balance-and-interest chart shows two curves: your remaining balance falling toward zero, and the interest you've paid climbing over time. Watching where they cross is instructive — it marks the point where you finally owe less than you've paid in interest alone. You'll find the same kind of logic in Appliance Depreciation Calculator.

What Changes the Result

Three inputs move the outcome, but not equally. The interest rate has the biggest effect — even one percentage point compounds across hundreds of payments, changing both the payment and the total interest substantially.

The term is the classic trade-off: a longer term lowers each payment but raises total interest, sometimes sharply. The loan amount scales everything proportionally. And extra payments act as a fourth lever — because they attack principal directly, their benefit is largest the earlier they're made.

The Biweekly Payment Strategy

One popular way to accelerate a loan without a big budget change is switching from monthly to biweekly payments. Paying half your monthly amount every two weeks produces 26 half-payments a year — the equivalent of 13 monthly payments instead of 12.

That one extra payment each year goes entirely to principal. On a typical 30-year mortgage, it quietly removes four to six years from the term. You can model the same effect here by dividing an extra annual payment by 12 and entering it as an extra monthly amount, or by selecting the bi-weekly payment frequency directly.

One caution: if you set this up with a lender, confirm they apply the extra straight to principal rather than holding it, since some servicers wait until a full monthly amount accumulates before crediting it.

Amortizing vs. Interest-Only Loans

Not every loan amortizes. On an interest-only loan, early payments cover just the interest, so the balance doesn't move at all during that period — and no equity is built. When the interest-only window ends, payments jump sharply to start repaying principal over the remaining, shorter term.

A fully amortizing loan, by contrast, chips away at the balance from the very first payment. It costs more each month up front, but you own more of the asset at every step and face no payment shock later. This calculator models the amortizing case, which is by far the most common for mortgages, auto, and personal loans.

Common Mistakes

• Reading it as your full housing cost. This is principal and interest only — taxes, insurance, and HOA fees are separate.
• Confusing years and months. A 30-year loan is 360 months, not 30.
• Chasing the lowest payment. A longer term lowers the monthly figure but can add tens of thousands in interest.

Accuracy & Limitations

This uses the standard amortization formula — the same one lenders use. Small differences from a lender's figure come from cent-rounding and a slightly adjusted final payment.

It models fixed-rate, fully amortizing loans only. It doesn't cover adjustable rates after reset, interest-only periods, taxes, or fees. It's a planning aid, not financial advice — rely on your lender's official schedule for a binding figure. This kind of mix-up comes up in Absolute Change Calculator too.

Real-World Uses

Homebuyers use it to compare a 15-year against a 30-year mortgage. Homeowners use it to decide whether extra principal payments are worth it. Car buyers use it to see the true cost of stretching a loan from 48 to 72 months for a lower monthly figure.

Borrowers with student or personal loans use it to build a realistic payoff plan, and anyone refinancing uses the remaining-balance column to know exactly what they'd need to pay off before signing a new loan. In each case, the schedule turns an abstract decision into concrete numbers.

Related Concepts

Principal is what you owe; interest is the cost of borrowing it. APR folds fees into the rate for a true-cost comparison, so it's usually a bit higher than the nominal rate. Equity is the share you actually own — it grows as principal is paid down, slowly at first and faster later, exactly mirroring the amortization curve.

One more term worth knowing is negative amortization, where a payment is smaller than the interest due, so the unpaid interest is added back to the balance and the loan grows instead of shrinks. A standard amortizing loan like the one modeled here never does this — every payment covers the full interest and reduces principal. For other calculations, CLTV Calculator - Customer Lifetime Value is also available on the site.