What is loan amortization?
Amortization is the process of repaying a loan through scheduled payments over time. Each payment typically covers the interest accrued for that period first, and the remainder reduces the principal balance. As the balance falls, the interest portion generally decreases and more of each regular payment goes toward principal.
Amortization formula
For a fixed-rate loan with monthly payments, the regular principal-and-interest payment is calculated using the following formula:
- M = regular monthly payment
- P = original loan principal
- r = monthly interest rate (annual rate divided by 12)
- n = total number of monthly payments
When the interest rate is 0%, the payment is simply the principal divided by the number of payments. The final payment in the schedule may be adjusted slightly to clear the remaining balance.
How to use this calculator
- Enter the original loan amount and annual interest rate.
- Enter the loan term in years and any additional months.
- Select the first payment date and currency symbol for displaying the results.
- Optionally enter an extra amount to pay toward principal each month.
- Click Calculate amortization to see the payment, total interest and full schedule.
- Choose the yearly summary, download the schedule as CSV, or print it for reference.
Why do early payments contain more interest?
Interest is calculated from the outstanding principal. The balance is largest at the beginning of a loan, so early payments usually contain more interest. As principal is repaid, the balance and the interest charged on it fall. Paying extra principal may reduce future interest and shorten the payoff period if your lender applies the extra amount directly to principal.
Frequently asked questions
What does an amortization schedule show?
It lists each scheduled payment and shows the amount allocated to interest, principal and any extra principal, together with the remaining loan balance.
Does an extra monthly payment reduce interest?
It can. If the lender applies the extra amount directly to principal, the outstanding balance falls faster and less interest may accrue over the remaining term. Fees or prepayment rules can affect the benefit.
Does this include taxes and insurance?
No. The estimate covers principal and interest only. Property tax, insurance, escrow, lender fees and other costs are excluded.
Can I use this for a car or personal loan?
Yes, if the loan uses a fixed interest rate and regular monthly payments. Actual results may differ if the lender uses daily interest, irregular payment dates, fees or different rounding rules.
Why might my lender's payment be different?
Lenders may use different day-count conventions, payment dates, rounding, fees or interest calculations. Use the lender's official amortization statement for contractual figures.
Are my loan details sent to a server?
The calculator's calculation logic runs in your browser and does not submit the loan input fields to this page's server. Your browser or other site services may have separate data practices.
Disclaimer: For educational planning only, not a loan offer, payoff quote or financial advice. Confirm the terms and payoff figures with your lender.