Amortization Calculator
Calculate loan amortization schedule with monthly payment breakdown
An amortization calculator helps you understand how your loan payments are applied to principal and interest over time. This tool generates a complete payment schedule showing exactly how much of each payment goes toward reducing your loan balance.
Amortization Schedule
How Amortization Works
Formula Explanation
Monthly Payment Formula:
M = P × [r(1+r)^n] / [(1+r)^n - 1]
- • M = Monthly payment
- • P = Principal loan amount
- • r = Monthly interest rate (annual rate ÷ 12)
- • n = Total number of payments (years × 12)
Example Calculation
For a $300,000 loan at 6% for 30 years:
- • Monthly payment: $1,799
- • Total interest: $347,515
- • Total payments: $647,515
- • First payment: $299 principal, $1,500 interest
- • Last payment: $1,790 principal, $9 interest
Frequently Asked Questions
What is loan amortization?
Loan amortization is the process of paying off a debt over time through regular payments. Each payment covers both interest and principal, with the interest portion decreasing and principal portion increasing over time.
How do extra payments help?
Extra payments go directly toward the principal balance, reducing the total interest paid and shortening the loan term. Even small extra payments can save thousands in interest over the life of the loan.
Why does interest decrease over time?
Interest is calculated on the remaining balance. As you pay down the principal, there's less money to charge interest on, so the interest portion of each payment decreases while the principal portion increases.
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