Loan Amortization Calculator
See how your loan balance decreases over time with detailed monthly breakdowns.
What Is a Loan Amortization Calculator?
The Loan Amortization Calculator helps you visualize how your loan balance decreases over time. It shows exactly how much of each monthly payment goes toward interest versus principal, providing a clear understanding of your repayment journey.
Whether you’re managing a mortgage, car loan, or personal loan, amortization is key to financial planning. This calculator helps you plan ahead, reduce debt faster, and save on interest.
How Loan Amortization Works
Amortization refers to the process of paying off a loan in fixed installments over a period of time. Each payment consists of two parts: principal (reduces your balance) and interest (the cost of borrowing).
In the early stages, a larger portion of each payment goes toward interest. As the balance decreases, more goes toward principal.
Formula Used in the Calculator
M = P × [r(1 + r)^n] / [(1 + r)^n – 1]
- M = Monthly payment
- P = Loan principal
- r = Monthly interest rate (annual ÷ 12 ÷ 100)
- n = Total number of payments (years × 12)
Example Calculation
Imagine you borrow $20,000 for 5 years at an interest rate of 5.5%. Your monthly payment would be around $382. Over the loan’s life, you’ll pay about $2,900 in interest.
Benefits of Using an Amortization Calculator
- 💡 Understand how much interest you’ll pay overall.
- 📉 Plan early repayments to reduce interest.
- 📊 Get a complete month-by-month breakdown.
- 🏦 Compare different loan offers easily.
Strategies to Save on Interest
- Make extra payments: Even small extra payments directly reduce principal.
- Refinance: If rates drop, refinance to reduce costs.
- Shorten your loan term: Pay more each month, but save big on total interest.
- Use windfalls wisely: Apply bonuses or tax refunds toward principal.
Amortization vs. Simple Interest
In an amortized loan, payments are structured so that you pay off both interest and principal in a fixed schedule. In contrast, simple interest loans calculate interest only on the remaining balance without compounding.
FAQ – Loan Amortization Calculator
1. Can I use this calculator for any loan?
Yes! It works for mortgages, personal loans, car loans, and business loans.
2. How is amortization different from interest-only loans?
Interest-only loans require only interest payments initially, while amortized loans pay both interest and principal monthly.
3. Can I export the amortization schedule?
You can easily copy the table and paste it into Excel or Google Sheets for your records.
4. What happens if I pay extra each month?
Your balance reduces faster, saving you money on total interest and shortening the loan term.
5. Is this calculator accurate for variable rates?
It assumes a fixed rate, but you can recalculate manually when your rate changes.
Related tools: Mortgage Calculator • Interest Calculator • Loan Calculator
External Resources: Investopedia – Amortization Definition | Bankrate – Amortization Schedule