Amortization Calculator

How to use the amortization calculator

1. Enter the loan amount, the interest rate (APR) and the term in years.
2. Pick the first payment date so the schedule shows real months and calendar years.
3. Optionally add an extra payment toward principal every month.

You get the monthly payment, total interest, payoff date, a chart of principal and interest by calendar year, a yearly summary and the full monthly schedule. The calendar-year view is handy at tax time, because it shows the interest paid in each year.

The amortization formula

The fixed monthly payment comes from the standard formula:

M = P × r(1 + r)^n ÷ [(1 + r)^n − 1]

• M = monthly payment
• P = loan amount
• r = monthly interest rate (APR ÷ 12 ÷ 100)
• n = number of monthly payments (years × 12)

Each row of the schedule then follows three steps:

1. Interest = current balance × r
2. Principal = M − interest (plus any extra payment)
3. New balance = current balance − principal

Because interest is always charged on the remaining balance, the interest portion shrinks every month and the principal portion grows by the same amount.

Worked example: $200,000 at 6% for 30 years

The payment is $1,199.10 a month for 360 months, and total interest comes to about $231,676.

In the first 12 months you pay $11,933.19 of interest and only $2,456.02 of principal. Halfway through the term, more than 70% of the original balance is still owed. Principal finally overtakes interest at payment 223.

How extra payments change the schedule

Every extra dollar goes straight to principal, so it stops collecting interest for the rest of the loan. On the same loan:

Extra payments made early save the most, because the balance they remove would otherwise have collected interest for decades. Before paying extra, confirm that your loan has no prepayment penalty and ask your servicer to apply the money to principal, not to future payments.

Amortization in accounting

The word has a second meaning. In accounting, amortization is spreading the cost of an intangible asset, such as a patent, software license or franchise right, over its useful life. Most companies use the straight-line method: annual amortization expense = cost ÷ useful life. A $50,000 patent with a 10-year useful life is expensed at $5,000 a year. Amortization is the intangible-asset version of depreciation, which applies to physical assets like machinery and buildings, and both are added back in EBITDA. This calculator covers loan amortization, the repayment of debt through scheduled payments.

Amortization schedule tips

• Compare terms side by side. A 15-year schedule on the same $200,000 at 6% costs $1,687.71 a month but saves about $127,888 in interest compared with 30 years.
• Use it for any fixed-rate installment loan. Mortgages, car loans and personal loans all amortize the same way. For a car purchase with tax and a trade-in, start with the auto loan calculator.
• Remember escrow. A mortgage payment usually also includes property tax and insurance. The mortgage calculator adds those so you see the full monthly bill.
• Biweekly plans. Paying half the payment every two weeks adds up to 13 monthly payments a year. You can model that here by entering one-twelfth of your payment as the extra amount.
• Check what you can afford first. The home affordability calculator works backward from your income to a loan size that fits.