Amortization Calculator
How much does a loan really cost? This free amortization calculator breaks any fixed-rate loan — mortgage, auto loan or personal loan — into its true components: the monthly payment, total interest over the life of the loan, total cost, and your exact payoff date. Enter the loan amount, annual interest rate and term; add an optional extra monthly payment to see how much interest you'll save and how many months earlier you'll be debt-free.
The year-by-year amortization schedule shows how each payment splits between principal and interest. Early in a loan, most of your payment feeds the bank's interest; over time the balance tips toward principal — that shift is the essence of amortization. Because interest is computed on the remaining balance, even a modest extra payment attacks principal directly and compounds into large savings: on a $300,000, 30-year loan at 6.5%, adding just $200 a month saves over $103,000 in interest and cuts nearly 7 years off the term. All figures update instantly as you type.
Year-by-Year Amortization Schedule
| Year | Principal Paid | Interest Paid | Remaining Balance |
|---|
Assumes a fixed rate, monthly compounding, and payments made on schedule at month-end. Excludes taxes, insurance, PMI and fees. The schedule includes any extra monthly payment you entered.
How to Use This Calculator
1. Enter the loan amount — for a mortgage, the home price minus your down payment. 2. Enter the annual interest rate (APR is close enough for estimates; the note rate is most accurate). 3. Set the term in years — 30 and 15 are standard for mortgages, 5–7 for auto loans. 4. Optionally add an extra monthly payment to model prepayment. The monthly payment, lifetime interest, payoff date and full schedule recalculate live, and the blue box quantifies exactly what your extra payments buy you.
The Amortization Formula
The fixed monthly payment is M = P · r(1+r)n / ((1+r)n − 1), where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12) and n is the number of monthly payments (years × 12). Each month, interest accrues as balance × r; the rest of your payment reduces principal. Because the balance falls slowly at first, early payments are interest-heavy — in year 1 of a $300,000, 6.5%, 30-year loan, $19,401 of your $22,754 in payments is interest and only $3,353 is principal. Extra payments skip the interest queue entirely: every extra dollar reduces principal immediately, shrinking all future interest charges.
Frequently Asked Questions
What is amortization?
Amortization is the process of paying off a loan through fixed, scheduled payments that cover both interest and principal. An amortization schedule shows, for every payment, how much goes to interest, how much to principal, and the remaining balance — until the balance reaches zero at payoff.
How much do extra payments really save?
A lot, because interest is charged on the remaining balance. On a $300,000, 30-year loan at 6.5%, an extra $200/month saves about $103,000 in interest and pays the loan off 83 months early. Even one extra payment per year (e.g. biweekly half-payments) typically cuts 4–5 years off a 30-year mortgage.
Is it better to pay extra principal or refinance?
It depends on rates and fees. Extra payments are free, flexible and reversible; refinancing resets the clock and costs 2–5% in closing fees but can slash the rate itself. Compare the refinance break-even period against how long you'll keep the home before deciding.
Why is my first payment almost all interest?
Monthly interest equals the remaining balance times the monthly rate. At the start, the balance is at its maximum, so interest eats most of the fixed payment. A $300,000 loan at 6.5% accrues $1,625 of interest in month one — leaving only ~$271 of a $1,896 payment for principal.
Does this work for car loans and personal loans?
Yes — any fixed-rate, fully amortizing loan follows the same formula: mortgages, auto loans, student loans and personal loans. It does not apply to interest-only loans, ARMs after adjustment, or credit cards (revolving debt).
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