Amortization Calculator

What this calculator does

An amortization calculator shows how a fixed-rate loan gets paid off over time. Enter your loan amount, interest rate, and term, and it works out your fixed monthly payment, then splits every payment into two parts: how much covers interest and how much pays down your balance. You also get a full amortization schedule, so you can watch your balance shrink month by month until it reaches $0.00.

How amortization works

A loan amortization calculator turns three numbers, your loan amount, rate, and term, into one fixed monthly payment, then divides each payment between interest and principal. Each month, the interest that built up is covered first, and whatever is left pays down your principal. Because your balance is largest at the start, early payments are mostly interest. As the balance falls, more of each payment goes to principal, even though the total payment stays the same.

The payment comes from a standard formula: payment = P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the loan amount, r is the monthly interest rate (annual rate / 12), and n is the number of payments.

Worked example: Say you borrow $20,000.00 at 6.0% for 5 years (60 payments). The monthly rate is 0.5% (6.0% / 12). Plug those in and the payment comes to about $386.66 per month. In month one, interest is $20,000.00 x 0.5% = $100.00, so $286.66 goes to principal and your balance drops to $19,713.34. By the last payment, nearly the entire amount goes to principal. Over the full term you would pay about $3,200.00 in total interest.

Reading your amortization schedule

An amortization schedule calculator like this one gives you more than a single monthly figure. Scroll through the schedule and you will see four columns for each month: the payment, the interest portion, the principal portion, and the remaining balance. Early rows lean heavily on interest, later rows lean on principal, and the final row brings your balance to $0.00. Reading it this way helps you see how much sooner you would be debt-free with a bit extra each month, or how much a lower rate would save.

Costs and factors to plan for

Your monthly payment rests on three things: how much you borrow, the interest rate, and the term. A longer term lowers the monthly payment but raises the total interest you pay over the life of the loan. A higher rate does the same. Also watch for extras a basic calculator may not capture, like origination fees that get rolled into the loan, or insurance and taxes your lender bundles in. When you compare offers, the APR is usually a fairer measure than the interest rate alone, because it folds in many of these fees.