Amortization Calculator

Amortization is paying off a loan through regular payments over time, so the balance you owe shrinks with every payment. Each payment covers that month's interest first, and the remainder reduces the principal balance, gradually shifting the mix of the payment toward principal as the loan matures.

The formula is M = L × r(1+r)^n ÷ [(1+r)^n − 1], where L is the amount borrowed, r is the annual interest rate divided by 12, and n is the number of monthly payments. For example, a $300,000 loan at 6.5% over 30 years (360 payments) comes to $1,896.20 a month.

Interest each month equals the remaining balance times the monthly interest rate. Early on, the balance is at its highest, so interest claims most of the fixed payment and only a small amount reduces principal. As the balance drops, less of the payment is needed for interest and more goes to principal — this shift is visible in the amortization schedule and the principal-vs-interest chart.

Extra principal payments reduce the balance immediately, so every later month's interest is calculated on a smaller amount. That compounds over the life of the loan: even modest recurring extra payments can cut total interest substantially and move up the payoff date, which this calculator shows by comparing the schedule with and without the extras.

The same total extra dollar amount saves slightly more interest the earlier it's applied, because it reduces the balance — and the interest calculated on it — sooner. A one-time payment made early in the loan behaves similarly to starting recurring extra payments right away; spreading the same amount out later in the loan saves a little less. In practice, consistency matters more than the exact timing.

Negative amortization happens when a payment is smaller than the interest due for that period, so unpaid interest is added to the balance and the loan grows instead of shrinking. It can occur with certain adjustable-rate or interest-only loan structures. This calculator always uses a payment that fully amortizes the loan, so the balance is scheduled to reach $0 by the end of the term.

Usually yes — spreading the same principal over fewer payments raises each one — but a shorter term also usually comes with a lower interest rate and always means far less total interest, since the balance is outstanding for less time. Compare terms here by changing the years and months and watching the total interest figure.

An amortization schedule (like the one this calculator produces) is a projection based on the original terms and any extra payments you plan to make. A payoff quote from your servicer is the exact amount needed to pay off the loan on a specific date, including any accrued interest or fees since your last statement. Use your servicer's payoff quote for an actual payoff, and this calculator for planning.

Yes. The math here is the standard fixed-rate amortization formula used for mortgages, auto loans, personal loans, and student loans alike. Enter the loan amount, rate, and term from your loan documents; only escrowed items like property tax and homeowners insurance (specific to mortgages) aren't included.

Small differences usually come from day-count conventions (some loans accrue interest daily rather than by a flat monthly rate), fees folded into the balance, or a first payment date that isn't exactly one month after closing. This calculator assumes level monthly compounding and an on-time first payment, which matches most fixed-rate installment loans closely but not exactly.