Loan Amortization Calculator
Monthly payments · Year-by-year schedule
Enter your loan details to see the full amortization schedule.
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Amortization Schedule
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How Loan Amortization Works
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 $500.49. Over 5 years you pay $5,029 in interest — 20% of the loan amount. Paying just $100 extra per month cuts the term by 13 months and saves $1,063 in interest.
Principal vs Interest
In early payments, most of your payment goes to interest. For a 30-year mortgage, the first payment might be 80%+ interest. By the midpoint, the split is roughly even. 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 30-year mortgage, paying $100 extra/month can cut the term by 4–5 years and save $25,000–$50,000 in interest depending on rate and balance.
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 income-driven student loan repayment plans.
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
What is an amortization schedule?+
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.
How is the monthly payment calculated?+
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.
How do extra payments work?+
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.
What is the difference between APR and interest rate?+
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.
Can I pay off a loan early?+
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 cuts about 4 years off the loan. Paying bi-weekly (26 half-payments = 13 full payments/year) is another popular strategy.
What is an interest-only loan?+
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 5–10 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.
How does a balloon payment work?+
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.
What happens if I miss a payment?+
Missing a payment triggers late fees (typically $25–$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.
How do adjustable-rate mortgages amortize?+
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.
What is a fully amortizing vs partially amortizing loan?+
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 5–10 year terms on 25–30 year amortization schedules, requiring refinancing or sale at maturity.