Loan Amortization Calculator
See how each payment splits between interest and principal and how the balance changes over time.
How to use this loan amortization calculator
- Enter the loan amount
Type the original amount borrowed into the loan amount field.
- Set the interest rate
Enter the annual interest rate for the loan.
- Choose the loan term
Enter the full repayment term in years.
- Add extra payments (optional)
Enter an optional extra monthly principal payment to see how it shortens the payoff timeline.
- Review the schedule
Check the payment summary for scheduled payment, total interest, payoff months, and balance after year one.
How this amortization calculator works
This amortization calculator goes beyond a simple payment quote by showing how a fixed-rate loan balance changes over time. Each monthly payment is split between interest (charged on the current balance) and principal repayment, and the mix shifts gradually as the remaining balance drops. That makes this tool valuable for understanding repayment mechanics, comparing shorter terms versus extra payments, and seeing how much equity you actually build in the early years of a loan.
Interest_n = Balance_(n-1) × r ; Principal_n = M – Interest_n ; Balance_n = Balance_(n-1) – Principal_n A $35,000 loan at 6.8 % over 5 years has a monthly payment of about $689.74. In month 1, interest is $198.33, so about $491.41 goes to principal — leaving a balance near $34,508.59. By month 12, the balance is about $28,915.77. If you add $100 per month in extra principal, the balance after year one falls to about $27,677.65 and the loan pays off in roughly 52 months.
Starting with the same $35,000 loan at 6.8 % but shortening the term to 3 years raises the monthly payment significantly, yet the total interest drops dramatically. The shorter schedule means principal is paid down faster, so less of each payment is consumed by interest charges over the life of the loan.
Taking the $35,000 loan at 6.8 % over 5 years and adding $100 per month in extra principal payments cuts the payoff period by several years. Each extra payment immediately reduces the balance that future interest is calculated against, creating compounding savings that grow larger the earlier the overpayments begin.
- ✓ The schedule assumes a fixed interest rate and regular monthly payments for the life of the loan.
- ✓ Extra payments are applied directly to principal, reducing the balance faster and shortening the remaining term.
- ✓ The model does not include late fees, skipped payments, interest capitalization, or lender-specific payment application rules.
- ✓ Compounding is monthly; loans that compound daily or use different day-count conventions may produce slight differences.
- Amortization schedules reveal that in the early years, a large portion of each payment covers interest rather than building equity — a critical insight for short-term homeowners.
- Comparing a shorter term versus extra payments on a longer term can show which approach saves more total interest for your specific balance and rate.
- If your lender applies extra payments differently (e.g., advancing the due date rather than reducing principal), your actual payoff may differ from this estimate.
- Amortization schedule methodology references
- Fixed-rate loan mathematics — Khan Academy Finance
What is loan amortization?
Loan amortization is the process of repaying a fixed-rate loan through equal periodic installments that gradually reduce the outstanding balance to zero. Each payment contains two components: interest charged on the remaining balance and a principal portion that shrinks the balance itself. In the early months, interest dominates because the balance is at its peak. As the balance decreases, the interest share of each payment falls and the principal share rises — a shift often called the amortization tilt. This structure means that borrowers build equity slowly at first and much faster toward the end of the loan. Understanding this tilt is critical for anyone deciding between a shorter term, extra payments, or refinancing, because changes made early in the schedule have a disproportionate impact on total interest cost compared to changes made later.
How extra payments reshape the schedule
Adding extra principal payments to an amortizing loan does more than shorten the term — it fundamentally alters the interest-versus-principal split for every remaining payment. When you make an extra payment, the outstanding balance drops immediately, which reduces the interest charged in the very next billing cycle. That freed-up interest becomes additional principal repayment, which further lowers the balance, creating a cascading effect. Even a modest recurring overpayment can shave years off a long-term loan and save a significant fraction of the original interest cost. The key insight is that extra payments are most powerful when made early, while the balance is high and the remaining interest exposure is greatest. Borrowers who wait until later in the loan to start overpaying still benefit, but the savings are smaller because less compounding time remains.
Loan amortization calculator FAQs
What is amortization?
Amortization is the process of paying off a loan through regular installments that gradually reduce the balance to zero, with each payment split between interest and principal repayment.
Why do early payments go mostly to interest?
Interest is charged on the outstanding balance. Since the balance is highest at the beginning of the loan, the interest portion of each payment is also highest in the early months.
How do extra payments affect the schedule?
Extra payments reduce principal faster, which lowers future interest charges and shortens the number of months needed to reach a zero balance.
What does balance after year one tell me?
It shows how much principal you have actually paid down after 12 payments, which is often much less than borrowers expect — especially on long-term loans.
Can I use this for mortgages?
Yes, for the fixed-rate principal-and-interest portion. For a fuller housing payment view that includes taxes and insurance, use the mortgage payment calculator as well.