Loan Amortization Calculator

How to Use This Calculator

1. Enter the loan amount — the principal you're borrowing after any down payment.
2. Set the rate and term — type a custom APR and term, or use a preset for personal, student, auto, or home-equity loans.
3. Add extra payments — try an extra $50 or $100/month to see how much interest you save.
4. Read your results — monthly payment, total interest, total paid, and payoff time update instantly.
5. Study the schedule — the chart and table show your shrinking balance year by year.

How Loan Amortization Works

When you take out an amortizing loan, the lender calculates a single fixed payment that will pay off the balance — principal plus interest — by the end of the term. Although the payment stays the same, its composition changes every month.

The fixed monthly payment is calculated with this formula:

Where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments.

Each month, interest is charged on the remaining balance first. The rest of your payment reduces the principal. Because the balance is largest at the beginning, early payments are interest-heavy. As you chip away at the principal, the interest portion shrinks and the principal portion grows — accelerating your payoff toward the end.

This is exactly why extra payments are so powerful. An extra payment applied entirely to principal removes that balance from every future interest calculation, saving you money for the entire remaining term of the loan.

Frequently Asked Questions

What is loan amortization?

Amortization is the process of paying off a loan with regular, equal payments over time. Each payment covers the interest accrued since the last payment, with the remainder reducing your principal balance. Early in the loan, most of each payment goes to interest; later, most goes to principal.

How is the monthly payment calculated?

The fixed monthly payment is found with the formula M = P[r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount, r is the monthly interest rate (APR ÷ 12), and n is the total number of payments. This produces equal payments that fully pay off the loan by the end of the term.

Why does so much of my early payment go to interest?

Interest is charged on your outstanding balance, which is highest at the start. So a large share of your first payments covers interest. As the balance shrinks, less interest accrues each month and more of your fixed payment goes toward principal — which is why the balance falls slowly at first and faster later.

How do extra payments help?

Extra payments go straight to principal, reducing the balance that future interest is charged on. This creates a compounding effect: every dollar of extra principal saves you interest for the remaining life of the loan. Even modest extra payments can cut years off the term and save thousands in interest.

What's the difference between APR and interest rate?

The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus certain lender fees, expressed as a yearly rate. For comparing the true cost of loans, APR is the more complete figure. This calculator uses the rate you enter as the nominal annual rate.

Does this work for any type of loan?

Yes. This calculator works for any fully-amortizing fixed-rate loan — personal loans, auto loans, student loans, home equity loans, and more. For mortgages specifically, try our dedicated Mortgage Calculator, which adds property-specific features.

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