Amortization Calculator

Amortization calculator at a glance#

An amortization calculator works out the fixed monthly payment on a loan and shows how each payment splits between interest and principal over the full term. It uses the principal, the annual interest rate and the number of payments, with the payment formula M = P × [r(1 + r)ⁿ] / [(1 + r)ⁿ − 1], where P is the loan amount, r is the monthly rate and n is the number of monthly payments.

Worked example. A $20,000 auto loan at 6% annual interest over 5 years has a monthly rate of 0.5% (0.06 / 12) and 60 payments (5 × 12). The fixed monthly payment is $386.66. The first payment's interest is the balance times the monthly rate: $20,000 × 0.005 = $100.00. The rest, $286.66, pays down the principal. Because the balance is now smaller, the next payment's interest is a little less and more goes to principal, which is how amortization works.

An amortization schedule lists every payment this way until the balance reaches $0. Early payments are mostly interest; later ones are mostly principal. Over the full 5 years this loan costs $3,199.36 in total interest on top of the $20,000 borrowed.

Enter your loan amount, interest rate and term in the calculator above for the exact monthly payment and a full payment-by-payment schedule. Real figures can shift slightly with rounding, fees, taxes or insurance added to the loan.

Reading your amortization schedule#

An amortization schedule lists every payment over the life of the loan and splits each one into interest and principal. Early payments are mostly interest, because interest is charged on the full outstanding balance. As the balance falls, the interest portion shrinks and more of each fixed payment goes to principal, so the loan pays down faster toward the end. The payment amount stays the same throughout; only the split changes.

How the loan term changes the cost#

A longer term lowers your monthly payment but raises the total interest, because you owe a balance for more years. A $200,000 loan at 4% costs $66,288 in interest over 15 years versus $143,739 over 30 years, so the 15-year term saves about $77,452. The trade-off is a higher monthly payment: roughly $1,479 for the 15-year loan against $955 for the 30-year. Lenders also tend to attach slightly higher rates to longer terms, widening the gap further.

Extra payments#

Any amount paid above the scheduled payment goes straight to principal, which cuts the balance that future interest is charged on. That shortens the term and lowers total interest. On a 30-year mortgage, one extra payment a year can shave roughly three to four years off the loan. The calculator above lets you add extra payments to see the exact effect on your payoff date and interest paid.

Costs outside the amortization#

Amortization covers only principal and interest. Mortgages usually carry other monthly costs that the schedule does not change: property taxes, homeowners insurance, private mortgage insurance (PMI) when your down payment is under 20%, and any HOA fees. These raise your total monthly outlay but not the principal and interest split, so budget for them separately from the amortization figures.

Fixed vs variable rates#

A fixed rate keeps the same monthly payment for the whole term, so the schedule is fully predictable. A variable or adjustable rate can change after an initial period, which moves the payment and reshapes the rest of the schedule. Fixed rates trade a slightly higher starting rate for certainty; variable rates can start lower but carry the risk that payments rise if rates climb.

Frequently asked questions#

How do I calculate amortization?#

Divide the annual rate by 12 for the monthly rate, multiply the current balance by that to get the month's interest, then subtract the interest from your fixed payment to get the principal paid. Reduce the balance by that principal and repeat for the next month.

How much interest is $20,000 amortized over 5 years?#

At a 5% annual rate over 60 months, the payment is $377.42 and you pay $2,645.48 in total interest on top of the $20,000. A different rate or term changes that figure.

How do you calculate the monthly payment of an amortized loan?#

Use M = P times r times (1 + r) to the power n, divided by (1 + r) to the power n minus 1, where P is the loan amount, r is the monthly rate, and n is the number of payments. The calculator above does this and returns the full schedule.

How does the loan term affect my payments?#

A longer term lowers the monthly payment but increases total interest, since you carry a balance for more years. A shorter term costs more per month but far less in total interest.