Loan Amortization Calculator
Monthly payments · Year-by-year schedule
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Amortization Schedule
| Year | Principal | Interest | Balance |
|---|
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How Loan Amortization Works
A $25,000 loan at 7.5% for 5 years has a fixed payment of $500.95 a month and costs $5,057 in interest. In the first month $156 of that payment is interest; by the last month it is about $3. Enter any amount, rate and term above to get the full payment schedule, payoff date and what extra payments save.
Amortization is the process of paying off a debt through regular scheduled payments over time. Each payment covers the accrued interest first, with the remainder reducing the principal. Early payments are mostly interest: later payments are mostly principal.
A 5-year $25,000 car loan at 7.5% APR has a monthly payment of $500.95. Over 5 years you pay $5,057 in interest, about 20% of the loan amount. Paying just $100 extra per month cuts the term by 11 months and saves $1,014 in interest.
Principal vs Interest
In early payments, most of your payment goes to interest. On a 30-year mortgage at 6.5%, about 86% of the first payment is interest, and principal does not overtake interest until year 20. This is why extra early payments have the biggest impact: they reduce the principal that interest accrues on.
Extra Payments
Even small extra payments dramatically reduce total interest on long loans. On a $300,000, 30-year mortgage, paying $100 extra a month cuts about 4 years and saves $40,000 to $88,000 in interest at rates from 5% to 8%.
Amortization vs Simple Interest
Most consumer loans (mortgages, car loans, student loans) use amortization: interest is calculated monthly on the remaining balance. Simple interest loans calculate interest on the original principal only. Credit cards use a revolving credit model, not amortization.
Negative Amortization
If your payment is less than the monthly interest, the unpaid interest is added to your balance: the loan grows instead of shrinking. This can happen with some adjustable-rate mortgages with payment caps and some older income-driven student loan plans. The Repayment Assistance Plan that opened in July 2026 waives unpaid interest instead.
Year-by-Year Schedule for a $25,000 Loan
7.5% APR, 60 monthly payments of $500.95.
| Year | Principal paid | Interest paid | Balance at year end |
|---|---|---|---|
| 1 | $4,282 | $1,730 | $20,718 |
| 2 | $4,614 | $1,397 | $16,104 |
| 3 | $4,972 | $1,039 | $11,132 |
| 4 | $5,358 | $653 | $5,774 |
| 5 | $5,774 | $237 | $0 |
The payment never changes, but the split does: interest is charged only on the balance still owed, so each month a little more goes to principal.
How Much of the First Payment Is Interest
The longer the term, the more of each early payment goes to interest.
| Loan | Payment | Interest share of payment 1 | Total interest |
|---|---|---|---|
| $25,000 car loan, 7.5%, 5 years | $501 | 31% | $5,057 |
| $35,000 student loan, 6.52%, 10 years | $398 | 48% | $12,733 |
| $300,000 mortgage, 6.95%, 15 years | $2,688 | 65% | $183,859 |
| $300,000 mortgage, 6.95%, 30 years | $1,986 | 87% | $414,904 |
What $100 Extra a Month Saves
A $300,000, 30-year fixed mortgage with $100 added to principal every month from the first payment.
| Rate | Interest saved | Paid off sooner by |
|---|---|---|
| 5% | $39,937 | 3.7 years |
| 6% | $53,346 | 3.9 years |
| 7% | $69,338 | 4.2 years |
| 8% | $88,301 | 4.5 years |
Extra payments save the most on long, high-rate loans and early in the term. On the $25,000 car loan above, the same $100 a month saves $1,014 and ends the loan 11 months early. For a full mortgage breakdown with taxes and insurance, use the mortgage calculator.
Method and sources. Payment: M = P × r(1+r)n ÷ ((1+r)n − 1), with r the monthly rate and n the number of payments. Each month, interest = balance × r and principal = payment − interest. All figures on this page were computed with that schedule; the 6.95% mortgage rate is the Freddie Mac PMMS 30-year average for 17 September 2026. Estimates only; lenders may round differently or add fees.
This calculator provides estimates for illustrative purposes. Actual payment amounts may differ due to rounding, fees, escrow, or specific lender terms. Consult your lender for exact figures.
Frequently Asked Questions
An amortization schedule is a table showing each payment's breakdown between principal and interest, and the remaining balance after each payment. For a 30-year mortgage, it has 360 rows. The early rows are mostly interest; later rows are mostly principal. Your total principal payments always equal the original loan amount. Your total interest payments are the true cost of borrowing.
Monthly payment = P × [r(1+r)^n] / [(1+r)^n - 1], where P = principal, r = monthly rate (annual rate / 12), n = total number of payments. Example: $200,000 at 6.5% for 30 years: r = 0.065/12 = 0.005417; n = 360; payment = $1,264.14. This formula ensures the loan reaches exactly $0 after the last payment.
Extra payments go directly to principal reduction, which shrinks the base that interest is calculated on. This creates a compounding effect: less principal means less interest next month, which means more of your regular payment goes to principal, and so on. The savings are largest when made early in the loan term. Extra payments on a mortgage are especially powerful because the loan term is long.
Interest rate is the base cost of borrowing. APR (Annual Percentage Rate) includes the interest rate PLUS fees: origination fees, mortgage insurance, points, closing costs spread over the loan term. APR is always equal to or higher than the interest rate. Use APR to compare different loan offers; use the interest rate for payment calculation. The difference matters most for short-term loans where upfront fees are a larger proportion of the total cost.
Yes: for most consumer loans, paying extra principal reduces the balance and shortens the term with no penalty (check your loan agreement for prepayment penalties, which are rare but exist on some mortgages). Simply make extra payments labeled 'apply to principal.' Even one extra payment per year on a 30-year mortgage at 6.5% cuts almost 6 years off the loan. Paying bi-weekly (26 half-payments = 13 full payments/year) is another popular strategy.
An interest-only loan has payments that cover only the interest during the initial period, with no principal reduction. After the interest-only period (typically 5 to 10 years), payments reset to fully amortizing payments covering both principal and interest. Monthly payments are lower during the interest-only period but jump significantly when principal repayment begins. These are common in commercial real estate and were prevalent in residential mortgages before 2008.
A balloon loan has regular payments (often interest-only or partially amortizing) with a large lump sum ('balloon') due at the end of the term. Example: a 7-year balloon on a 30-year amortization schedule has payments calculated as if it's a 30-year loan, but after 7 years the entire remaining balance is due. Borrowers typically refinance or sell the property. Balloon loans are common in commercial real estate and some business financing.
Missing a payment triggers late fees (typically $25 to $50 or 5% of the payment, whichever is less). After 30 days, it's reported to credit bureaus. After 90+ days, the loan may be sent to collections. For secured loans (mortgage, auto), default can lead to foreclosure or repossession. Most lenders have hardship programs: call immediately if you anticipate trouble making payments. A brief forbearance is always better than a delinquency.
ARMs start with a fixed rate for an initial period (5/1, 7/1, 10/1), then adjust annually. The payment is recalculated at each adjustment based on the new rate and remaining balance and term. This makes it impossible to create a static amortization schedule for the full life of an ARM: you'd need to estimate future rates. The initial amortization is the same as a fixed-rate loan; after the first adjustment, a new schedule is calculated.
A fully amortizing loan pays off the entire balance by the final payment. A partially amortizing loan pays off only part of the balance: the rest is due as a balloon payment. Most consumer loans (mortgages, auto, student) are fully amortizing. Commercial real estate loans are often partially amortizing with 5 to 10 year terms on 25 to 30 year amortization schedules, requiring refinancing or sale at maturity.
Interest each month is the rate times the balance still owed, and the balance is highest at the start. On a $300,000 mortgage at 6.95% for 30 years, $1,738 of the first $1,986 payment is interest (87%). As the balance falls, the interest part shrinks and the principal part grows by the same amount, because the payment stays fixed.
At 6.95% for 30 years you pay $414,904 in interest on top of the $300,000 borrowed, with a payment of $1,986 a month. Over 15 years at the same rate the payment is $2,688 and total interest drops to $183,859. Adding $100 a month to the 30-year loan saves about $53,000 to $69,000 at rates of 6% to 7%.