Amortization Calculator
Calculate your loan payment and see the full amortization schedule — how much of every payment goes to interest versus principal, how fast your balance actually declines, and how much an extra payment could save you.
Background
Amortization means paying off a loan through equal periodic payments, where each payment covers that period's interest first and puts the rest toward the principal. Because the interest is always calculated on the remaining balance, the mix shifts over time: early payments are mostly interest, and late payments are mostly principal — even though the payment amount itself never changes.
How to use this calculator
- Choose Amortization Schedule for the standard case: you know the loan amount, rate, and term, and want the payment and full breakdown.
- Choose Extra Payments to see how much time and interest an extra monthly payment saves.
- Choose Solve for Loan Amount to flip the problem around: if you know what payment you can afford, find the maximum you could borrow.
- Click Calculate to see the payment, a balance-over-time chart, a principal-vs-interest breakdown, and a year-by-year table.
How amortization works
Each period, interest is charged on whatever balance is still outstanding — not on the original loan amount.
The payment amount is fixed for the life of the loan, calculated so the balance reaches exactly zero on the final payment.
Since the balance is highest at the start, early payments are mostly interest. As the balance shrinks, more of each fixed payment goes to principal.
Because of this, the loan balance drops slowly at first and rapidly toward the end — the "halfway point" in time is well before the "halfway point" in balance paid off.
Any extra amount paid goes straight to principal, which reduces the balance interest is calculated on for every remaining period — this is why even small extra payments compound into large interest savings.
Formula & Equations Used
Monthly payment: M = P · i · (1+i)ⁿ / ((1+i)ⁿ − 1), where P is the loan amount, i is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments.
Each period: interest = balance × i, principal = M − interest, new balance = balance − principal.
Solving for loan amount: P = M · ((1+i)ⁿ − 1) / (i · (1+i)ⁿ) — the same formula, rearranged for P instead of M.
Example Problems & Step-by-Step Solutions
These cover cases the Quick Examples chips above don't already demonstrate.
Example 1 — Financing a car
You finance \$25,000 for a car at 7% annual interest over 5 years. What's your monthly payment, and how much interest will you pay in total?
Step: i = 7%/12 = 0.5833%, n = 60 payments. Plug into the payment formula.
Result: payment ≈ \(495.03/month, and you'll pay about \)4,701.80 in total interest over the 5 years.
Example 2 — A smaller extra payment
A \$150,000 mortgage at 5% for 30 years — what happens if you add just \$100 extra to every monthly payment?
Step: The extra \$100 applies directly to principal every month, so interest is calculated on a smaller balance from then on, compounding the savings.
Result: the loan is paid off in 283 months instead of 360 (about 6.4 years early) and saves roughly \$34,605 in interest.
Example 3 — Working backward from affordability
You've budgeted \$800/month for a loan payment. At 6% annual interest over 30 years, what's the most you could borrow?
Step: Use the loan-amount formula with M=\$800, i=0.5%, n=360.
Result: you could borrow up to about \$133,433 at that payment, rate, and term.
Example 4 — First payment vs. last payment
On a \$300,000 loan at 7% for 30 years (payment ≈ \$1,995.91), compare what payment #1 and payment #360 actually go toward.
Step: Payment 1: balance is still the full \(300,000, so interest = \)1,750.00, leaving only \$245.91 for principal. Payment 360: balance is almost zero, so interest is just \$11.58, leaving \$1,984.33 for principal.
Result: the exact same payment amount goes from 88% interest at the start to 99% principal at the end.
Frequently Asked Questions
Why does my balance drop so slowly at first?
Interest is charged on the current balance, which is largest at the very start of the loan. Since your payment is fixed, a bigger chunk of it is consumed by interest early on, leaving less to actually reduce the balance — even though the payment never changes.
Does paying extra always help the same amount?
Extra payments save more interest the earlier they're made, since they remove principal — and the interest it would have generated for every remaining period — while the most time (and remaining balance) is still on the table.
What's the difference between the interest rate and the actual cost of the loan?
The interest rate is a yearly percentage; the total interest paid depends on both the rate and the term. A lower rate over a much longer term can still cost more in total interest than a higher rate over a short term — always check the total interest, not just the rate.
Does this handle biweekly or other payment frequencies?
This calculator assumes standard monthly payments and monthly compounding, which covers the vast majority of mortgages, auto loans, and student loans. Biweekly plans (26 payments/year) effectively add one extra monthly payment per year — you can approximate that here using the Extra Payments mode with roughly 1/12 of a monthly payment as the "extra" amount.
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